FX News

Market Overview

Key Points:

• UK Prime Minister Truss says sorry to media for her recent mistakes – saying she will be sticking around after restoring economic stability
• Stocks rebound Monday erasing Friday’s declines
• Bank of Canada outlook looks to view a recession within 12 months
• ECB’s Guidos predicts the Euro to stabilise over the coming months with predictions of falling inflation
• Ukraine announced more than 100 prisoners have been swapped with Russia in what is the first all-female exchange in the 8-month war
• China have locked down a district in Zhengzhou telling 1million people to stay home signalling no change to their zero covid rules
• The British Pound (GBP) was the strongest currency last week while the Japanese Yen (JPY) was the worst performer. Read more

Risk markets were back in black in overnight with equity indices all closing stronger. The Australian Dollar (AUD) moved to 0.6430 (1.5555) late Monday before giving back gains into Tuesday. The Euro is feeling better after changes to the UK fiscal policy pushing the pair back to 0.6390 (1.5650). Our call for moves to retest the 0.6170 (1.6200) zone after further EUR momentum late last week remains, especially with a lack of economic data publishing over the week. All eyes will be on Aussie jobs data Thursday for direction signals.

Current Level: 0.6395 (1.5637)
Resistance: 0.6505 (1.6200)
Support: 0.6170 (1.5370)
Last Weeks Range: 0.6383-0.6557 (1.5250-1.5665)

The British Pound (GBP) has held the 1.8050 (0.5540) level late Friday and into this week’s open pushing to 1.8200 (0.5495) briefly early Tuesday, the Feb 2022 low against the Australian Dollar. New UK treasury boss Jeremy Hunt said Monday he was reversing nearly all of the Govt’s planned tax cuts and would pull back on the energy price cap subsidy as he tries to reassure markets the backbone of the economic finances remains intact. Growing doubts over whether new PM Truss will survive in govt much longer after much carnage of late remains up for debate. Looking ahead we have UK CPI y/y Wednesday predicted to rise from 9.9% to 10.0%. This should rally the GBP.

Current Level: 0.5540 (1.8050)
Resistance: 0.5880 (1.8200)
Support: 0.5500 (1.7800)
Last Weeks Range: 0.4935-0.5113 (1.9557-2.0263)

The Australian Dollar (AUD) came off Friday’s low of 0.6190 against the US Dollar (USD) returning to 0.6280 in early Tuesday as equities closed higher in overnight trading. The question is, will it hold, far too often in the past few weeks we have seen the Aussie make gains only to slump to new lows. A push higher through last week’s high at 0.6350 will go a long way to signal further upside could be possible. US data in the form of Empire State Manufacturing declined in October, the index falling 8 points in the New York State area. Discouraging Chinese manufacturing numbers and subsequent weaker iron ore prices are all underpinning the Aussie underperformance of late. Australian jobs numbers print Thursday our key data announcement this week and should reflect an improvement in the labour market.

Current Level: 0.6294
Resistance: 0.6520
Support: 0.6160
Last Weeks Range: 0.6168-0.6378

Stock indices turned positive Monday closing higher and taking the New Zealand Dollar (NZD) higher to 0.5760 (1.7360) from 0.5700 (1.7540). The kiwi gave back gains into Tuesday however to 0.5720 (1.7485). UK political chaos has set the scene of late in the cross, overnight tax change rhetoric setting the tone for a better performing EUR. This morning’s NZ CPI released at 2.2% q/q, y/y 7.2% vs forecast 7.3% spiking the NZD to 0.5765 (1.7350) post release as the data highlighted the central bank of NZ could be a way off easing back on interest rate rises. Further downside bias in the cross is predicted over the rest of the week.

Current Level: 0.5745 (1.7406)
Resistance: 0.5830 (1.7560)
Support: 0.5695 (1.7140)
Last Weeks Range: 0.5717-0.5820 (1.7181-1.7489)

The New Zealand Dollar (NZD) continues to post new lows, reaching 0.4925 (2.0310) overnight against the British Pound (GBP) where it sits as I write. Markets are still reflecting on poor English data of late deciding it’s all good, recent tax cuts and budget backtracks the main drivers over the past couple of weeks. The Production sector was the main driver (-1.8%) in August of the fall of GDP -0.3%, the British economy will be lucky to avoid dipping into a formal recession in the fourth quarter 2022. NZ CPI q/q was forecast to publish at 1.5% but came in at 2.2% pushing the kiwi to 0.4990 (2.004). Later in the week we have UK Retail Sales. We expect further downside in the NZD as tightening policy in the UK should reflect a more attractive buy over the kiwi.

Current Level: 0.4976 (2.0096)
Resistance: 0.5110 (2.0300)
Support: 0.4925 (1.9570)
Last Weeks Range: 0.4933-0.5112 (1.9561-2.0270)

The New Zealand Dollar (NZD), Australian Dollar (AUD) cross has consolidated around the 0.8960 (1.1160) area after travelling from 0.8810 (1.1350) last week. Diverging central bank forecasts have improved the kiwi in the last two weeks and could continue to do so for a while yet. NZ third quarter CPI released at 2.2% well up on expectations of 1.50% pushing the kiwi all-round the park before settling around – 0.8970 (1.1160). Y/Y this is 7.2% down from 7.3% with consensus at 6.6% clearly this is not what the govt was looking for. This will no doubt push up predictions of cash rates.

Current Level: 0.8982 (1.1124)
Resistance: 0.9010 (1.1230)
Support: 0.8905 (1.1100)
Last Weeks Range: 0.8807-0.9009 (1.1100-1.1354)

The New Zealand Dollar (NZD) came up for air off Monday’s open reaching 0.5630 against the US Dollar (USD). A break higher past 0.5670 is key to solidify momentum to the upside. NZ CPI 3rd quarter came in at a poor 2.2% based on predictions of 1.5% taking the y/y figure from 7.3% to 7.2%- a disastrous release compared to forecasts of 6.6%. The kiwi appreciated 40 odd points and could push higher throughout the day into overnight NY. As sure as the sun will rise the US will enter a recession over the coming months, the timing of this is hotly debated but with inflation persistently high this is causing pain. The forecast for 2023 is looking increasingly gloomy with economists picking growth to contract in the first two quarters of the year, a downgrade from “mild” growth. In the medium term the kiwi may struggle to develop buyer interest with the attractiveness and “safe haven” of the greenback, however with fresh expectations of the RBNZ raising rates higher than predicted this could change.

Current Level: 0.5653
Resistance: 0.5800
Support: 0.5500
Last Weeks Range: 0.5509-0.5680

Tuesday 18/10
1:30AM, USD, Empire State Manufacturing Index
Forecast: -4.3
Previous: -1.5
3:30AM, USD, BOC Business Outlook Survey
10:45AM, NZD, CPI q/q
Forecast: 1.50%
Previous: 1.70%
1:30PM, AUD, Monetary Policy Meeting Minutes
3:00PM, CNY, GDP q/y
Forecast: 3.40%
Previous: 0.40%
3:00PM, CNY, Retail Sales y/y
Forecast: 3.50%
Previous: 5.40%

Wednesday 19/10
7PM, GBP, CPI y/y
Forecast: 10.00%
Previous: 9.90% Read more

US Inflation is still on the rise, further tightening is unavoidable
US CPI seals the deal for another 75-point hike at the Fed’s next policy meeting
The US Dollar soured after the CPI read this morning sending the USD/JPY, AUD/USD, USD/CAD, and NZD/USD to multiyear extremes
NZ September Manufacturing PMI 52.0 vs 54.8
China has no set timeframe for the exit of their zero covid strategy
Germany receives first direct gas delivery from France to ease the energy crunch
US Jobless claims 228k vs 225k
The British Pound (GBP) was the strongest currency this week while the Australian Dollar (AUD) the weakest.