FX News

UK CPI is on the rise again back to 10.1% in September after dipping briefly to 9.9% in August. The largest contribution to rising costs was in food -namely oils, fats and dairy products. Also rising energy costs fuelled by the cost of the Russia-Ukraine war and the Bank of England’s loose monetary policy. The British Pound (GBP) dipped to 0.5660 (1.7670) to end the week after Liz Truss’s six-week chaotic reign came to an end. Markets keenly await the new PM Sunak’s economic strategy, the Pound feeling better about recent events trading back to 0.5580 (1.7920) into Thursday. Earlier Australian CPI was a huge miss rising to 1.8% q/q and 7.3% y/y up from 6.1% raising questions of bigger forecasts to rate hikes needed from the RBA.

Current Level: 0.5581 (1.7917)
Resistance: 0.5620 (1.8460)
Support: 0.5420 (1.7800)
Last Weeks Range: 0.5495-0.5659 (1.7668-1.8197)

The Australian Dollar (AUD) continues to climb off the recent low of 0.6185 against the US Dollar (USD) clocking 0.6490 this morning as markets enjoy the recent bout of “risk on”. A softer big dollar is also helping with improvements, we note recent moves may come up against resistance around the 0.6550 zone. The recent Fed pivot on policy with suggestions they may ease “hard” policy is doing the rounds and creating demand for risk assets. US advance GDP Friday for the September quarter is forecast to come in at 2.3%- markets will pay close attention to the release. US buyers should consider current levels.

Current Level: 0.6487
Resistance: 0.6750
Support: 0.6160
Last Weeks Range: 0.6199-0.6387

The Euro was slammed towards the weekly close against the New Zealand Dollar (NZD), the cross finishing up around the 0.5850 (1.7100) zone after starting the week at 0.5715 (1.7500). A risk off Monday saw the kiwi give back gains back to 0.5750 (1.7400) before settling around 0.5780 (1.7300) in this morning trade. Against the USD the Euro broke through parity posting a 6-week high. Later in the week we have the ECB policy statement and rate release, predictions of a rise from 1.25% to 2.0% widely expected, a sizable rise in line with efforts to bring down ballooning 9.9% inflation. The kiwi will need a few big days to break the Euro bull run trend.

Current Level: 0.5774 (1.7319)
Resistance: 0.5865 (1.7550)
Support: 0.5700 (1.7050)
Last Weeks Range: 0.5698-0.5851 (1.7089-1.7548)

The cost of living in the UK got harder Friday after CPI came in at 10.1% y/y up from 9.9% in August returning to the 40 year high reached in July. The biggest contribution was in food rises. The British Pound (GBP) depreciated post the release against the New Zealand Dollar (NZD) to 0.5110 ( 1.9560) where it closed for the week. Rishi Sunak is the UK new prime minister after months of carnage- he will lead the conservative party replacing Liz Truss who was only there for 44 days, Sunak will pilot a country struggling and divided by an economic downturn. The GBP pushed up Monday to 1.9950 (0.5010) in the face of rising equity prices, markets clearly seeing Sunak with more integrity and reliability. Meanwhile UK Manufacturing came in poor at 45.8 well under the 47.9 predicted reflecting poor output. We expect the prior low of 0.4925 (2.0300) should hold over the week.

Current Level: 0.5009 (1.9964)
Resistance: 0.5100 (2.0300)
Support: 0.4925 (1.9600)
Last Weeks Range: 0.4922-0.5112 (1.9561-2.0316)

The Australian Dollar (AUD) has bounced back off 0.9090 (1.10) this week against the New Zealand Dollar (NZD) reaching 0.8950 (1.1170) late Wednesday. Yesterday’s Aussie CPI release gave the Aussie a boost coming in much higher than predicted at 7.3% y/y off 6.1%- q/q 1.80% after 1.6% was forecast. This is a whopper release, not unpredictable given the latest set of Aussie date releases. From here we look ahead to Tuesday’s RBA rate release and policy statement with some analysts suggesting the RBA will hike rates another 0.5% by the end of 2022 with another meeting in early December to consider. We see the cross dropping to 0.8900 (1.1235) levels over the next few days.

Current Level: 0.8972 (1.1135)
Resistance: 0.9100 (1.1400)
Support: 0.8770 (1.0990)
Last Weeks Range: 0.8938-0.9100 (1.0988-1.1187)

The New Zealand Dollar (NZD) started the week on the backfoot against the US Dollar (USD) dropping to 0.5650 returning profits from late Friday’s squeeze to 0.5770. Risk on sentiment improved amid broad based big dollar weakness into 0.5830. The Fed announced they are well into the late stages of their tightening cycle helping to rally stocks and risk products across the board. Yesterday morning something rare happened in the US treasury yield prices- the 3 year surpassed the 10-year highlighting discouraging signs for the US economy suggesting a recession is close. Meanwhile US consumer confidence data plunged in October, also a barometer for how the Fed goes about tightening policy. We think the NZD may retest 0.5850 resistance this week.

Current Level: 0.5822
Resistance: 0.6000
Support: 0.5650
Last Weeks Range: 0.5546-0.5763

Market Overview

Key Points:

• Rishi Sunak has been appointed by King Charles III as the new prime minister of Great Britain and replaces Liz Truss only 44 days in. Sunak is the first Hindi prime minister and the youngest for more than 200 years at the age of 42
• Most NZ economists believe NZ inflation has topped out
• Bank of Canada’s Macklem expects to see growth near zero over the next few quarters
• The Peoples Bank of China sold US Dollars Tuesday to support the declining Yuan
• Australian Inflation soars through 7.0% y/y with questions being raised as to where this leaves the RBA
• The British Pound (GBP) has been the strongest currency this week while the US Dollar (USD) has been the worst performer Read more

Monday 24/10
All Day, NZD, Bank Holiday
2:30pm, CNY, GDP q/y
Forecast: 3.30%
Previous: 0.40%
Actual: 3.90%
8:15pm, EUR, French Flash Services PMI
Forecast: 51.6
Previous: 52.9
Actual: 51.3
8:30pm, EUR, German Flash Manufacturing PMI
Forecast: 45.7
Previous: 46.9
Actual: 47.8
8:30pm, EUR, German Flash Services PMI
Forecast: 44.9
Previous: 45
Actual: 45
9:30pm, GBP, Flash Manufacturing PMI
Forecast: 47.9
Previous: 48.4
Actual: 45.8
9:30pm, GBP, Flash Services PMI
Forecast: 48
Previous: 50
Actual: 47.5

Tuesday 25/10
2:45am, USD, Flash Services PMI
Forecast: 49.6
Previous: 49.3
Actual: 46.6 Read more

The New Zealand Dollar (NZD) has made further gains on the Australian Dollar (AUD) this week- the third week straight, the cross reaching 0.9100 (1.0990) before dropping back to 0.9050 (1.1050) into Friday. The diverging central bank theory got put on notice midweek after the NZ CPI release indicated further interest rate hikes would be required to bring down rising inflation. With predictions of another 1.0% – 1.5% of further hikes this has and should make the NZD more attractive to investors. We expect the pair to sit around current levels for the next few days leading into the early Nov RBA cash rate release. The only data of note which could add value to the AUD is next week’s CPI q/q print. Buyers of AUD should consider prices above 0.9000 (1.1100) as we don’t expect the kiwi rally to hold into November.

The current interbank midrate is: NZDAUD 0.9032 AUDNZD 1.1066
The interbank range this week has been: NZDAUD 0.8938- 0.9100 AUDNZD 1.0989- 1.1187

The New Zealand Dollar (NZD) has been the top dog this week rising to 0.5740 yesterday against the US Dollar (USD) before dropping back to 0.5670 into Friday trading. Earlier the CPI release brought buyers back into the NZD after predictions on further rate hikes fast came into play. CPI for the 3rd quarter came in slightly lower from 7.3% to 7.2% on a year-on-year basis but it was the quarterly result which surprised at 2.2% after forecasters had predicted 1.5%. This indicates a squeeze on consumer buying in the past few months with increased utilities, construction and renting, all of which could worsen heading into 2023. The chart suggests we are sitting at the top of the early August bear channel which representing good buying.

Exchange Rate
The current interbank midrate is: NZDUSD 0.5674
The interbank range this week has been: NZDUSD 0.5547- 0.5739