FX News

Although the Euro (EUR) is still struggling greatly over most currency crosses this is not so against the New Zealand Dollar (NZD), the kiwi hit hard by the recent bout of “risk off” moves taking the pair to 0.5945 (1.6820) this morning the EUR extending its bull run over recent weeks all the way back to early July levels. Looking ahead we have French and German manufacturing data to print Friday with industry expansion predicted to be soft potentially putting the EUR under pressure. The Euro still looks overbought to us given global risk factors in play; we still believe 0.5930 (1.6860) support will hold over the week.

Current Level: 0.5943 (1.6826)
Resistance: 0.6030 (1.6970)
Support: 0.5890 (1.6580)
Last Weeks Range: 0.5892-0.6038 (1.6560-1.6970)

UK Data hasn’t been that rosy of late with the latest Retail Sales figures dropping -1.6% in August much worse than the -0.50% expected. The British Pound (GBP) struggling against the New Zealand Dollar (NZD) closing the week around 0.5265 (1.9000) levels. This week the Pound has kicked back with the risk correlated kiwi again on the back foot as equity markets slumped. The GBP recovered losses to (0.5210) 1.9190 into Tuesday trading. Thursday’s Bank of England policy announcement and rate release is highlighted on the calendar with the central bank expected to raise rates from 1.75% to 2.25% in a 9-0 vote by members. The GBP may lose ground on the release if the BoE is overly hawkish.

Current Level: 0.5212 (1.9186)
Resistance: 0.5325 (1.9300)
Support: 0.5180 (1.8780)
Last Weeks Range: 0.5180-0.5276 (1.8952-1.9302)

It’s onwards and upwards for the Australian Dollar (AUD) , leaving the New Zealand Dollar (NZD) in the dust. The cross reached 0.8860 (1.1285) this morning, a March 2016 level. Although both currencies have been undermined by global fears and policy tightening by other central banks that may tip the balance into a world recession, the Australian Dollar has fared better based on a tighter labour market and an overall sturdy economy which is fast heading towards “neutral” policy. The RBNZ has more “work” to do to achieve a balanced economy. Meanwhile the pair could test 0.8800 (1.1365) levels in the short to medium term with Australia fending off recession warnings.

Current Level: 0.8856 (1.1282)
Resistance: 0.8945 (1.1420)
Support: 0.8755 (1.1180)
Last Weeks Range: 0.8884-0.8944 (1.1180-1.1256)

The New Zealand Dollar (NZD) continues to decline against the US Dollar (USD) reaching a new low Monday of 0.5928 well below the key level at 0.6000 we have been watching. The latest run down in global sentiment shook the kiwi after being hit hard by last week’s stronger than expected US CPI data. Solid NZ data of late hasn’t helped with more downside expected. This week’s Federal Reserve meet should bring a further 75 points hike to their interest rate with chances of a 100-point rise to 3.5% possible. The recent higher August CPI report which saw the rate jump from expectations of 8.1% to 8.3% has led the market to price chances of a 100-point hike. The overall response will depend on where they see the inflation heading.

Current Level: 0.5963
Resistance: 0.6000
Support: 0.5900
Last Weeks Range: 0.5938-0.6158

Market Overview

Key Points:

• The Queen’s Funeral was predicted to have been watched by over 4 billion viewers around the world making it the most watched broadcast in history.

• The Federal Reserve is expected to continue with their tightening plans this week and raise rates 75 points to 3.25%, however its 50/50 the Fed raises 1%
• Member Joachim of the European Central Bank spoke over the weekend saying “we must bring inflation back under control, we mustn’t let up, even if the economy worsens
• Japan is to use 3.5T (209B USD) in reserve funds reserved for economic measures to address inflationary pressures
• ANZ picks the RBNZ Cash rate to peak at 4.75% mid 2023
• We expect an overly hawkish tone at this week’s Bank of England rate release which could stir UK recession fears and further weaken the Pound
• The US Dollar (USD)  has been the strongest currency over the month of September while the Japanese Yen (JPY) has been the weakest, this is closely followed by the New Zealand Dollar (NZD)
• The NZD has broken through key support and psychological 0.6000 with this level now acting as resistance in the NZD/USD cross, if we don’t see a proper pickup through this zone this week we could see further “southern action”  continue.

Major Announcements last week:

• US CPI q/q 0.6%
• UK CPI y/y 9.9% – forecast 10.0%
• NZ GDP q/q 1.7%
• Australian Unemployment Rate 3.5% vs 3.4% predicted
• UK Retail Sales August -1.6%

Monday 19/09
All Day, JPY, Bank Holiday
3pm, NZD, RBNZ Gov Orr Speaks
All Day, GBP, Bank Holiday

Tuesday 20/09
1:30pm, AUD, Monetary Policy Meeting Minutes

Wednesday 21/09
12:30am, CAD, CPI m/m
Forecast: -0.10%
Previous: 0.10%
12:30am, CAD, Common CPI y/y
Forecast: 5.50%
Previous: 5.50%
12:30am, CAD, Median CPI y/y
Forecast: 5.00%
Previous: 5.00%
12:30am, CAD, Trimmed CPI y/y
Forecast: 5.50%
Previous: 5.40%
5am, EUR, ECB President Lagarde Speaks Read more

Australian employment data came in light yesterday initially not making a dent on the Australian Dollar (AUD), US Dollar (USD) cross. However, with risk sentiment poor and punters buying up the greenback we have seen the cross post 0.6690 a May 2020 low. The Unemployment rate unexpectedly clicked higher to 3.5% from 3.4% in August and the workforce added 33,500 jobs to the economy as predicted. The RBA might see these numbers as a result of tighter monetary policy doing its job. Of note the participation rate rose to 66.6% just 0.2% below the record high set in June and the pre-covid level. The tight labour market however suggests the RBA will keep rising interest rates over the coming months but at a slower pace we suspect. Looking ahead we have the FOMC statement and rate release next week with the Fed widely predicted to hike to 3.25% from 2.5%.

The current interbank midrate is: AUDUSD 0.6700
The interbank range this week has been: AUDUSD 0.6683- 0.6915

Risk averse conditions in financial markets supported the Euro (EUR) this week extending recent gains against the New Zealand Dollar (NZD) to 1.6750 (0.5970) where it sits in early Friday trading. New Zealand GDP data for the second quarter published much higher than the 1.0% markets were predicting at 1.7%, this shouldn’t persuade the RBNZ to change up their policy over the coming months as inflation – the root of the economic problems still needs managing. The RBNZ should still keep the view of another 1.0% of hikes this year to 4.0%. The Euro looks overbought and could test 0.5880 (1.7000) support, we think this area should hold as the kiwi is expected to recover losses.

The current interbank midrate is: NZDEUR 05962 EURNZD 1.6772
The interbank range this week has been: NZDEUR 0.5962- 0.6083 EURNZD 1.6439- 1.6771

The English Pound (GBP) reached 0.5180 (1.9300) Thursday against the New Zealand Dollar (NZD) , a 5-week high. The kiwi has struggled all week off the back of UK inflation data coming in under forecast of 10.1% at 9.9% y/y helping to support the GBP along with a risk off tone. UK Inflation unexpectedly edged lower off the 1982 high, the first time in nearly a year it has eased. NZ Growth for the second quarter came in at a healthy 1.7% much higher than the predicted 1.0% with the economy avoiding a recession. The kiwi is holding gains into Friday kicking back to 0.5220 (1.9150) but may struggle towards the close with risk markets starting to turn down.

The current interbank midrate is: NZDGBP 0.5200 GBPNZD 1.9230
The interbank range this week has been: NZDGBP 0.5180- 0.5277 GBPNZD 1.8950- 1.9300

The New Zealand Dollar (NZD) slumped to 0.8888 (1.1250) in early week trading against the Australian Dollar (AUD) recovering from the NZ quarterly GDP release to 1.1185 (0.8940). GDP printed at 1.7% for the second quarter after 1.0% was predicted, the economy bouncing back from first quarter numbers at -0.2% as NZ came out of covid lockdowns and tourism improved. Households spent more on hospitality and accommodation however overall consumer spending looks to be slowing. Aussie employment data came in benign with the Unemployment Rate ticking higher to 3.5% from 3.4% and the participation rate maintaining near record highs around 67%. The Aussie has had the upper hand in Friday trading with the cross around 0.8908 (1.1222). Key 0.8820 (1.1340) suggests a 7 year low, we wouldn’t bet against this materialising.

The current interbank midrate is: NZDAUD 0.8898 AUDNZD 1.1233
The interbank range this week has been: NZDAUD 0.8884- 0.8942 AUDNZD 1.1182- 1.1256