FX News

Central Bank divergence has had the biggest impact on the New Zealand Dollar (NZD), Australian Dollar (AUD) cross over the past while with the Aussie bids winning out in recent weeks. However, strangely enough last week’s central bank releases confirmed the RBA was pulling back on future hiking compared to the ongoing tightening cycle by the RBNZ which brought buyers of NZD back to the party. A sign that things were starting to change back to old school cash rate investor attractiveness over recent economic stability. We have no data to release this week, so we expect the cross to bounce around in the recent ranges between 0.8740 (1.1440) and 0.8890 (1.1250).

Current Level: 0.8847 (1.1294)
Resistance: 0.8930 (1.1500)
Support: 0.8700 (1.1200)
Last Weeks Range: 0.8738-0.8855 (1.1293-1.1443)

US Non-farm Payroll Friday came in above expectations with 263k new jobs being added to the workforce more than the 248k predicted. The Unemployment Rate unexpectedly dipped from 3.7% to 3.5% pushing up the US Dollar (USD) across the board, the New Zealand Dollar (NZD) retreating to 0.5600 leading into the close. Monday’s action has seen more investors exit the kiwi as equity indices closed lower post the US Holiday. The NZD posting a fresh low of 0.5545 early this morning a March “covid” 2020 level. Buyers of USD are getting nervous with the cross edging closer to 0.5466 the extreme “covid” low. Past here and we are thin air all the way to the “GFC” lows of 2008/2009 levels below 0.5000. Fresh Missile attacks on Ukraine cities have only added to the USD safe zone plea. As US interest rates continue to rise this should continue to undermine the NZD for a while.

Current Level: 0.5572
Resistance: 0.5850
Support: 0.5470
Last Weeks Range: 0.5593-0.5811

Market Overview

Key Points:

• Equity markets bounce back over 2% on the day taking risk currencies along for the rise
• Markets had previously priced in a 50-point hike today by the RBA, but this has changed to a 50/50-, 50- or 25-point hike
• Markets have turned from the view of speculating on a global recession to pricing one in
• Fed’s Williams sees inflation cooling but underlying pressures remain – global supply chain woes easing
• Japanese media are reporting North Korea have launched a missile and people in Hokkaido should seek shelter, Japan’s second largest Island
• Ukrainian troops take back four provinces in Ukraine after advancing several kilometres
• The British Pound (GBP) was the strongest currency last week while the US Dollar (USD) is the worst performing Read more

Monday 10/10
All Day, JPY, Bank Holiday

Tuesday 11/10
All Day, CAD, Bank Holiday
All Day, USD, Bank Holiday
6:35am, USD, FOMC Member Brainard Speaks
7pm, GBP, Average Earnings Index 3m/y
Forecast: 5.90%
Previous: 5.50%
7pm, GBP, Claimant Count Change
Forecast: 4.2K
Previous: 6.3K

Wednesday 12/10
5am, USD, FOMC Member Mester Speaks
7:35am, GBP, BOE Gov Bailey Speaks
7pm, GBP, GDP m/m
Forecast: 0.00%
Previous: 0.20% Read more

The Australian Dollar (AUD), Euro (EUR) has bounced to all corners over the week, pushing higher to 0.6645 (1.5050) initially before risk sentiment pulled buyers out of AUD, the pair dropping to 0.6495 (1.5400) and back to 0.6550 (1.5270) into Friday. The RBA slowed the pace of their tightening policy Tuesday raising interest rates only 25 points to 2.6% from 2.35%, surprising markets as a 0.50% move was the more popular option. The RBA has pared back their peak in the RBA cash rate to 2.85% and will hike just one more time. With commodity prices predicted to fall in 2023 and the surge in construction costs to dissipate, the RBA also confirming benign wage growth pressures haven’t been an issue like other central banks are experiencing. We see heavy support at the 0.6500 (1.5400) level, past here the next support areas is 0.6170 (1.6200).

The current interbank midrate is: AUDEUR 0.6551 EURAUD 1.5264
The interbank range this week has been: AUDEUR 0.6486- 0.6645 EURAUD 1.5048- 1.5417

The British Pound (GBP) extended last week’s gains to 1.7700 (0.5650) against the Australian Dollar (AUD) midweek before the Aussie fought back post the RBA cash rate announcement. The Reserve bank of Australia slowed the pace of their tightening policy by raising their interest rate 25 points to 2.6%, surprising economists after expectations of a 50-point rise was the favoured option. The RBA has pared back their peak to 2.85% and will hike just one more time most likely on the 1st of November. Markets were disappointed by the recent Truss speech which came up short on details of how she was going to generate growth. Looking ahead we have monthly UK GDP Wednesday expected to come in at 0.2%.

The current interbank midrate is: AUDGBP 0.5744 GBPAUD 1.7409
The interbank range this week has been: AUDGBP 0.5647- 0.5800 GBPAUD 1.7240- 1.7707

The Australian Dollar (AUD) looked good over the early part of the week against the US Dollar (USD) reaching 0.6530 but was sharply sold off Thursday the cross down at 0.6100 as I write, the downtrend continuing. The Aussie finding going tough as the divergence between the RBA and Fed widens. The RBA slowed the pace of their tightening policy by raising their interest rate 25 points to 2.6% from 2.35%, surprising a bunch of market players as a 50-point rise was the preferred option. The RBA has pared back their peak in the RBA cash rate to 2.85% and will hike just one more time. The rise was the 6th in succession since May following rises in June, July, August, and September. The RBA has been indicating for a while they were setting up to start slowing the pace confident that inflation will soon be cooler in 2023. A break below 0.6380 and the AUD enters the Abyss. US Non-Farm Payroll releases tonight.

The current interbank midrate is: AUDUSD 0.6415
The interbank range this week has been: AUDUSD 0.6388- 0.6546

The New Zealand Dollar (NZD) made solid attempts this week to recover months of losses against the Euro (EUR) trading up to 0.5840 (1.7130) Monday and 0.5860 (1.7070) post Wednesday’s RBNZ announcement but has failed to push on with the long term bear trend back in play- the cross at 0.5770 (1.7320) in early Friday as equity markets turn red on the day. The RBNZ raised their interest rate to 3.5% from 3.0% the 5th straight occasion the central bank has hiked in this tightening cycle. Most market makers still predict the RBNZ to keep rising above 4.0%, possibly reaching 4.5% before the government contemplates inflation is beaten. Orr said, domestic spending remained strong and employment levels are high despite house prices continuing to decline. The Euro may continue to struggle in the near term as EU officials call for a joint borrowing plan to combat the eurozone energy crisis.

The current interbank midrate is: NZDEUR 0.5781 EURNZD 1.7298
The interbank range this week has been: NZDEUR 0.5715- 0.5858 EURNZD 1.7069- 1.7495

The New Zealand Dollar (NZD) extended declines over most of the week breaking briefly below key 0.5000 (2.000) support against the British Pound. The first time since February this year. The GBP wasn’t able to sustain the level however, the kiwi back at 0.5070 (1.9720) in early Friday trading after equity markets improved. Fitch ratings agency has lowered its forecast of the UK economic outlook from stable to negative. Fitch saying the recent “fiscal” package announced as part of the government’s growth plan leads to significant fiscal deficits over the coming months. They expected the govt growth deficit would be nearly 8% of GDP compared to nearly 9% in 2023 unless they took offsetting measures. Meanwhile new PM Truss and finance Minister backtracked on their tax cut to top income earners, this caused UK gilt yields to fall sharply, this sent the NZD/GBP to 0.5000 (2.000). The RBNZ raised their key interest rate to 3.5% from 3.0% the fifth straight time the central bank has raised in this tightening cycle, the kiwi popping up to 0.5100 (1.9600) levels where it’s been able to hold around here into Friday.

The current interbank midrate is: NZDGBP 0.5069 GBPNZD 1.9727
The interbank range this week has been: NZDGBP 0.4987- 0.5115 GBPNZD 1.9547- 2.0052

The New Zealand Dollar Reached 0.5813 midweek against the US Dollar (USD) before falling back at the Reserve Bank of New Zealand cash rate Release. The RBNZ raised their key interest rate to 3.5% Wednesday from 3.0% the fifth straight time the central bank has hiked in this tightening cycle. Inflationary pressures continue to undermine the economy. Most market makers still predict the RBNZ to keep rising above 4.0%, possibly topping out at 4.5% before the govt believes inflation has been defeated. These hikes are certainly in line with other central banks policy despite growing recession prospects, all except the RBA who this week announced a slowing pace. Orr said, domestic spending remained resilient and employment levels are high despite house prices continuing to decline. US Non-Farm Payroll prints tonight and is predicted to be a bumper release giving the kiwi a boost into the close.

The current interbank midrate is: NZDUSD 0.5658
The interbank range this week has been: NZDUSD 0.5596- 0.5812