FX News

The path of both the RBA and RBNZ monetary policy widened this week when both central banks hiked rates. The RBA less than economists were predicting- only 25 points instead of the 50 points expected. This signals their intention they are nearly “done” with their hiking cycle, markets now pricing in just one more rise of 25 points to 2.85%. This is in stark contrast to the RBNZ who have a way to go before they reach the mid 4% zone hiking 50 points to 3.50% Wednesday. RBNZ’s Orr says it remains appropriate to continue to tighten for the foreseeable future in order to bring down inflation. The NZDAUD pushed up over the week to 0.8900 (1.1240) into Friday before the AUD recovered losses to 0.8820 (1.1340)

The current interbank midrate is: NZDAUD 0.8822 AUDNZD 1.1324
The interbank range this week has been: NZDAUD 0.8740- 0.8898 AUDNZD 1.1238- 1.1441

US Equity markets closed the 3rd quarter with one of the worst Septembers in years
The Federal Reserve has been criticised over the months for raising interest rates too slow- now they are being accused of raising too fast
Deputy PM Robertson on the wires saying he is not concerned for the NZ economic outlook
Grocery prices have risen in the last year by 13% around the globe- this is the biggest rise since March 1979
IMF say the chances of a global recession are rising
German economic forecasts suggest -0.4% GDP next year putting them in a recession
The US Dollar (USD) was the strongest currency over the month of September while the New Zealand Dollar (NZD) was the weakest.

The Australian Dollar (AUD) bounced back off the weekly close of 0.6523 (1.5330) the long term low to 0.6635 (1.5070) into Tuesday on improving market sentiment and equity market rises, the DOW up over 2.5% on the day. The Euro has come under pressure as Russia captured four Ukraine regions with no end to the war insight. This week’s key standout is today’s RBA cash rate announcement with a rise to 2.85% expected, most likely the last 50-point rise in this tightening cycle before 25-point rises come into effect as Lowe cautiously approaches warnings of choking economic growth.

Current Level: 0.6614 (1.5119)
Resistance: 0.6685 (1.5340)
Support: 0.6520 (1.4960)
Last Weeks Range: 0.6523-0.6796 (1.4714-1.5329)

The English Pound (GBP) staged a massive recovery last week coming from 0.6300 (1.5890) to close around 0.5760 (1.7370) as the carnage continued. Confusion around govt politics with the government set to tax high income earners was abolished. Truss saying, she was “absolutely committed”. She was undone by finance minister Kwarteng when he announced they were not proceeding saying- “we get it and we listened”. The GBP rose sharply after the news was confirmed. Today’s RBA rate announcement is our focus with another rise to 2.85% predicted. Usually this would bring buyers back into the AUD, but we are not so sure today.

Current Level: 0.5740 (1.7421)
Resistance: 0.6060 (1.7780)
Support: 0.5625 (1.6500)
Last Weeks Range: 0.5727-0.6306 (1.5856-1.7460)

Equity rallies off Monday’s open have returned the Australian Dollar (AUD) to a healthier 0.6500 against the US Dollar (USD) from recent historical lows around 0.6380. US Bond yields ticked lower as the greenback was sold off. The US Dollar index retreated to 112.00. The US economy is facing a hard landing as the Federal Reserve remains committed to fighting inflation despite fears they could send the economy into recession. The Fed are predicted to raise rates further to around 4.4% early 2024. The labour market remains tight- it seems the only way the US economy is able to bring down inflation is to delve into recession. The RBA rate release is out today with the central bank expected to raise interest rates to 2.85% from 2.35%- perhaps the last big move before Lowe backs off and slows the tightening cycle to 25-point moves. Downside risks remain in the pair. Buyers of USD should consider.

Current Level: 0.6505
Resistance: 0.6640
Support: 0.6360
Last Weeks Range: 0.6362-0.6529

The New Zealand Dollar (NZD) reached a new low Friday, touching 0.5705 (1.7530) a November 2020 against the Euro (EUR). Markets exciting the kiwi after Russia captured 4 Ukraine regions. Monday’s prices improved as risk conditions turned- equity markets all closing higher on the day with talk of Russia no longer having control of these captured provinces as Ukraine troops advanced. On the calendar this week we have the RBNZ rate announcement and policy statement. With the central bank predicted to raise a further 50 points to 3.5% the fifth straight 50-point hike. Analysts are predicting the bank may need to hike to 4.5% well into 2023 to combat rising inflation.

Current Level: 0.5816 (1.7193)
Resistance: 0.5935 (1.7530)
Support: 0.5705 (1.6850)
Last Weeks Range: 0.5706-0.5969 (1.6751-1.7525)

Last week’s uptrend in the British Pound (GBP) was indeed intense across the board after the Pound collapsed to 0.5535 (1.8070) early in the week before surging back to briefly reach 0.5010 (1.9960) against the New Zealand Dollar (NZD). A perfect storm of political uncertainty, Inflation and higher interest rates threatened the financial system in the UK spooking markets. The tax cuts by new PM Truss sparked concerns about the UK’s fiscal stability crashing the GBP and UK govt Bonds known as “gilts”. The UK then abolished the planned tax cuts to high income earners after a public backlash making a U turn on the commitment sending the GBP to 0.5020 (1.9920). On the calendar this week is the RBNZ cash rate announcement and a hike to 3.5% which could give the kiwi a boost.

Current Level: 0.5047 (1.9813)
Resistance: 0.5335 (1.9950)
Support: 0.5010 (1.8750)
Last Weeks Range: 0.5011-0.5548 (1.8023-1.9954)

The New Zealand Dollar (NZD) clocked its lowest price of 0.8707 (1.1485) mid last week against the Australian Dollar (AUD) since November 2013. Both RBNZ and RBA central banks come out to play this week with both predicted to raise rates by 50 points to 3.5% and 2.85% respectively. It will be the 8th straight rise for the RBNZ while just the sixth for the RBA. Governor Lowe seems to believe they are close to slowing tightening to 25 point moves in efforts to not choke the economy into recession. We should see the normal volatility around both releases with rhetoric being the key for determining ongoing tightening viewpoints. As we have been saying for week’s – Aussie buyers should consider options.

Current Level: 0.8789 (1.1366)
Resistance: 0.8890 (1.1500)
Support: 0.8695 (1.1250)
Last Weeks Range: 0.8705-0.8837 (1.1315-1.1487)

The New Zealand Dollar (NZD) closed the week around 0.5590 against a rampant US Dollar (USD) just off the midweek low at 0.5560 the March 2020 level. US Dollar (USD) strength remains a key factor across currencies with the Federal Reserve defiant they will continue with their steep tightening cycle in the wake of deepening recession prospects. Predictions are for the US economy may face a hard landing in 2023 with a tight labour market and reports the housing market is turning amid a market which is highly leveraged- a sign for tough times ahead. Meanwhile the September PMI index is down, the lowest since September 2020 putting the big dollar under pressure into Tuesday. The RBNZ are setting up for their fifth consecutive hike Wednesday of 50 points, Orr saying earlier he sees the tightening cycle as “mature” and “well advanced”. It’s hard to see any signs of a decent  reversal higher in the pair but we could see a spike around the cash rate release.

Current Level: 0.5720
Resistance: 0.5840
Support: 0.5560
Last Weeks Range: 0.5564-0.5748

• 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