FX News

The English Pound (GBP) climbed through the 1.7000 (0.5880) level overnight to reach 1.8100 (0.5525) a fresh high against the Australian Dollar (AUD). Recent economic data out in the UK hasn’t exactly been GBP supportive of late but the GBP has performed well despite this over the past 3 weeks outperforming the kiwi. Overnight markets focused on parts of the UK budget being reversed and tax cuts deferred. This includes more than 20B worth of unfunded tax cuts including corporate tax. Earlier UK GDP fell by -0.3% in the month of August after 0.1% growth in July confirming an underlying trend lower over the last 3 months suggesting a recession could be close. UK inflation prints next week, expected to stay up around the 9.9% y/y mark. With the cross moving off 0.6300 levels this time 3 weeks back clearly this shows how good these levels are to sell GBP.

Exchange Rates:
The current interbank midrate is: AUDGBP 0.5565 GBPAUD 1.7969
The interbank range this week has been: AUDGBP 0.5520- 0.5757 GBPAUD 1.7369- 1.8114

The Australian Dollar (AUD) slumped to 0.6170 in the late NY session Friday against the US Dollar (USD) before reversing losses back to 0.6300 levels around mid-morning. US CPI slowed for the 3rd month running, releasing at 8.2% for September representing the lowest in 7 months compared to August’s 8.2%. Equity markets dropped over 2% on the release before rallying back to close the day up 2-3% across the major indices. Core CPI rose 6.6% from 6.3%, other than lower vehicle and apparel prices there was little else suggesting inflation is being tamed. The rally back from 0.6170 left everyone wondering what on earth just happened. Perhaps purely technical, we do have a support line drawn on our chart representing Feb 2020 lows. By the USD Dollar on the spike.

Exchange Rate:
The current interbank midrate is: AUDUSD 0.6303
The interbank range this week has been: AUDUSD 0.6168- 0.6378

The New Zealand Dollar (NZD), British Pound (GBP) hovered around 0.5065 (1.9750) over most of the week before the Pound took control early today. The Pound rallied to 2.0270 (0.4935) , sinking through key support at 0.5000 (2.000) for the first time since February this year. Markets pushed aside poor economic data earlier in the week instead focusing on parts of the UK budget being reversed and tax cuts deferred. This includes more than 20B worth of unfunded tax cuts including corporate tax. Earlier UK GDP fell by -0.3% in the month of August after 0.1% growth in July confirming a slowing trend over the last 3 months with threats of a recession looming. Selling GBP under 0.5000 represents particularly good selling levels.

Exchange Rate:
The current interbank midrate is: NZDGBP 0.4984 GBPNZD 2.0064
The interbank range this week has been: NZDGBP 0.4934- 0.5114 GBPNZD 1.9554- 2.0266

The New Zealand Dollar (NZD) extended declines early week against the US Dollar (USD) to 0.5530 before recovering to 0.5630 Thursday on a broad rally of risk assets. The rebound had all the hallmarks of a “short squeeze” – sellers exiting positions on the view the cross would travel lower. US CPI slowed for the 3rd month running, releasing at 8.2% for September representing the lowest in 7 months compared to August’s 8.2%. Equity markets dropped over 2% on the day before rallying back to close the day up 2-3% across the major indices. Core CPI rose 6.6% from 6.3%, other than vehicle and apparel prices there was little else implying inflation was being beaten. Buyers of USD should consider as we look to be at the top of the long-term bear channel.

Exchange Rates:
The current interbank midrate is: NZDUSD 0.5644
The interbank range this week has been: NZDUSD 0.5512- 0.5657

Diverging central banks have seen the New Zealand Dollar (NZD) push higher to 0.8980 (1.1140) in early day trading, recouping the last 4 weeks of losses against the Australian Dollar (AUD). The kiwi seeing fresh support from the RBNZ’s ongoing tightening cycle compared with the RBA’s plan to hike interest rates just once more. A slump in iron ore prices hasn’t helped the Aussie of late, the commodity falling to 96.50 per tonne, the lowest in nearly 11 months. Key standouts on the calendar next week are Australian Jobs data and NZ Inflation q/q. Retesting the 0.9000 zone is a possibility prior to the weekly close.

Exchange Rates:
The current interbank midrate is: NZDAUD 0.8951 AUDNZD 1.1171
The interbank range this week has been: NZDAUD 0.8807- 0.9000 AUDNZD 1.1111- 1.1354

The Euro (EUR) extended its domination over the Australian Dollar (AUD) at Monday’s open pushing the cross to 0.6490 (1.5415) into Tuesday as risk sentiment stumbled. The Euro however still generally speaking is under pressure with a combination of weaker Eurozone data and a dovish ECB. German industrial orders and Eurozone Retail Sales were also below expectations. Clearly the AUD remains a currency under fire despite the recent RBA hawkish policy stance and their plan to peg back rate rises. At Least while the war on Ukraine continues, we may see more of the same moves. This morning the cross pushed aside support at 0.6535 (1.5300) to reach 0.6500 (1.5400) signalling we could see further moves towards 0.6175 (1.6200) support.

Current Level: 0.6475 (1.5444)
Resistance: 0.6580 (1.6200)
Support: 0.6170 (1.5200)
Last Weeks Range: 0.6486-0.6648 (1.5049-1.5416)

The British Pound (GBP), Australian Dollar (AUD) cross settled around 0.5750 (1.7400) through the latter half of the week closing around this level. Risk sentiment post Friday’s Non-Farm Payroll release sent equities lower Monday, the Aussie already on the back foot falling to 0.5695 (1.7560) in early Tuesday. To be fair the GBP is doing reasonably well with news of late not being overly Pound supportive. Manufacturing was poor, the weakest since 2020 and the Bank of England will extend its gilt buying to 10B per day this week. The recent hawkish rhetoric by chancellor Kwarteng’s brought forward mini budget fanned speculation back to markets of a larger hike at the next BoE meet of November 3rd. A push past 0.5620 (1.7800) areas could signal a broader decline for the Aussie.

Current Level: 0.5674 (1.7624)
Resistance: 0.6040 (1.7880)
Support: 0.5595 (1.6550)
Last Weeks Range: 0.5648-0.5800 (1.7240-1.7704)

Another wave of US Dollar (USD) strength post last week’s Non-Farm Payroll release has sent the Australian Dollar (AUD) lower, extending last week’s bear run from 0.6540 to around the 0.6300 zone in thin US Holiday trading. US equity market indices moved sharply lower in the wake of Friday’s NFP release, the data showing 263k jobs were added to the economy in September – better than expected while the Unemployment Rate unexpectedly improved from 3.7% to 3.5%. This data made the Fed more hawkish than they already were, reinforcing an argument for the Fed’s need to raise rates hard in order to fight inflation without taking the heat for pressure of a worsening job’s market. Markets predict the Fed to raise rates 75 points early November. Looking ahead we have US CPI y/y Friday which is predicted to come in lower from the current 8.3% at 8.1%. Further falls predicted through 0.6000 in the medium term.

Current Level: 0.6264
Resistance: 0.6540
Support: 0.6000
Last Weeks Range: 0.6352-0.6545

The equity/risk aligned New Zealand Dollar (NZD) has again retraced its downward trajectory after getting plenty of support against the Euro (EUR) through the middle stages of last week then giving back gains. The cross reached 0.5860 (1.7070) before closing around 0.5770 (1.7340), into Tuesday struggling around 0.5750 (1.7400) as it looks to retest last week’s long term low of 0.5700 (1.7530) of November 2020. The risk driven NZD may yet suffer more declines into the end of the year despite data improving locally and Eurozone data printing fragile.

Current Level: 0.5742 (1.7415)
Resistance: 0.5775 (1.7700)
Support: 0.5650 (1.7320)
Last Weeks Range: 0.5715-0.5858 (1.7069-1.7495)

The British Pound (GBP) regained control over the New Zealand Dollar (NZD) leading into the weekly close, clawing back mid-week losses to finish up back around 1.9800 (0.5050) levels. Earlier downgrade by Fitch rating agency of the UK credit outlook took a toll, also of note were poor results in UK construction PMIs with the weakest data since May 2020. UK chancellor Kwarteng decision to bring forward his date to deliver his set of economic forecasts to 31 October didn’t go down well. Meanwhile the Bank of England will extend its gilt buying program to 10B per day this week. On the calendar this week we have German Industrial Production and Retail Sales. The cross should hold below 0.5075 (1.9700) this week.

Current Level: 0.5021 (1.9916)
Resistance: 0.5130 (2.0450)
Support: 0.4890 (1.9500)
Last Weeks Range: 0.4986-0.5115 (1.9547-2.0055)