FX News

A risk off tone engulfed the New Zealand Dollar (NZD) over the week against a preferred US Dollar (USD) with prices falling to .6060 early this morning. Stocks have been hit hard affecting positive NZD flows. US Consumer Confidence came in at 103.2 compared to 97.6 for August following 3 months of declines, the outlook for incomes, business and labour market conditions clearly on the rebound. Of note US gasoline prices have fallen again for the 11th consecutive week to around 3.80 a gallon offering some relief to consumers. ISM Manufacturing PMI published up on expectations at 52.8 vs 52.1 supporting a better looking third quarter. The kiwi bouncing off the low post the news back 0.6080. US Non-Farm Payroll prints in the morning and should throw out the normal volatility. Anything less than 295k and we could see a fresh low in the cross.

Exchange Rates:
The current interbank midrate is: NZDUSD 0.6082
The interbank range this week has been: NZDUSD 0.6059- 0.6193

The New Zealand Dollar (NZD) returned to form this week against the Australian Dollar (AUD) crunching out a solid performance with price returning from 0.8905 (1.1230) to 0.8975 (1.1140) into Friday trading. As risk assets were sold off giving way to broad based US Dollar strength the kiwi has feared just a touch better considering bigger picture themes at play. Looking into next week’s action we have the RBA policy meeting and Cash Rate with a further 50 points hike expected to 2.35%, the alarm now is the cause and effect on raising rates to fast with too much attention to inflation. We shall see.

Exchange Rates:
The current interbank midrate is: NZDAUD 0.8947 AUDNZD 1.1167
The interbank range this week has been: NZDAUD 0.8890- 0.8974 AUDNZD 1.1143- 1.1248

Key Points:

• The Chinese economy is struggling to recover from the second quarter slowdown with Industrial Production and Retail Sales the main causes amid zero tolerance covid lockdowns
• South Korea has said North Korea nuclear testing is not imminent as they continue to prepare missiles for launch
• The ECB meet next week and should hike rates 75 points, this predates expectations of another hike of 50 points in October and 25 in December
• Goldman Sachs are predicting a United Kingdom recession in the 4th quarter of 2022
• The US Dollar (USD) has been the strongest currency in the month of August while the British Pound (GBP) and the Japanese Yen (JPY) share the spot of the weakest on the main board of currencies
• The Euro (EUR) has fallen below parity against the US Dollar (USD) in recent days and posted a fresh daily low of 0.9914 Monday, the first time this has happened since December 2002 Read more

The Euro (EUR) dropped to 1.4280 (0.7000) late Friday against the Australian Dollar (AUD) surpassing the prior low in April this year of 1.4320 (0.6985) posting a fresh April 2017 low. Miraculously the EUR recovered at the close of the week and has pushed higher to 1.4550 (0.6870) into early Tuesday on risk sentiment. Equity markets have been hit hard over the past few days but stabilised overnight helping the Euro make a recovery. Australian Retail Sales surged 1.3% in July the biggest in 4 months defying higher rates and inflation. The report was expected to print at 0.3% after a 0.2% rise in June and 0.7% in May. With consumer sentiment down and growth expectations predicted to be dire over the coming months, it’s one out of the bag for sure. The RBA is expected to hike rates by 50 points in September with inflation expected to climb to over 8% this year. I wouldn’t get excited of a return to form for the Euro this week.

Current Level: 0.6893 (1.4507)
Resistance: 0.7010 (1.4740)
Support: 0.6785 (1.4260)
Last Weeks Range: 0.6845-0.7003 (1.4278-1.4609)

English Pound (GBP) weakness continues against the Australian Dollar (AUD) into the new week with prices now extremely high- at October 2017 levels around 0.5900 (1.6950) heading into Tuesday. The dire economic forecast set by the Bank of England has been detrimental in any GBP recovery of late. The Bank of England will raise rates 50 points next week possibly more as the central bank look committed to taking action to tame inflation back into its 2.0% range. Analysts have forecast the economy will slip into recession late this year and not recover until well into 2025. It’s a thin calendar this week for the pair with no tier one data publishing. We predict more of the same this week with fresh highs likely.

Current Level: 0.5890 (1.6977)
Resistance: 0.5795 (1.6920)
Support: 0.5795 (1.6920)
Last Weeks Range: 0.5809-0.5909 (1.6921-1.7212)

End of last week’s trading saw a large correction lower in the Australian Dollar (AUD), US Dollar (USD) cross, with price tracking from around 0.7000 to 0.6840 into Monday. Chinese data and an outperforming greenback had Aussie bids struggling. Fed’s Powell came in hot speaking at the Jackson Hole event saying he will continue to raise interest rates to combat rising inflation, his comments disappointing markets after many had thought inflation had peaked… not so. Equity markets closed flat this morning after several days of losses- the Aussie has bounced back to around 0.6900 as I write. Looking ahead we have Non-Farm Payroll to consider Friday. Downside risks remain this week.

Current Level: 0.6901
Resistance: 0.7100
Support: 0.6840
Last Weeks Range: 0.6855-0.7007

The Euro (EUR) recovered late Friday against the New Zealand Dollar (NZD) coming off 1.5970 (0.6260) areas to claw back losses to 1.6240 (0.6160). Monday’s action saw the Euro extend out to 1.6350 (0.6120) before falling back towards 1.6220 (0.6165) early Tuesday. Despite the recent splurge we see setbacks in the Euro accelerating further – eventually surpassing 0.6290 (1.5890) resistance as the situation worsens in the Eurozone. I dare say those selling EUR may want to consider at these levels. Looking ahead we have German CPI y/y Wednesday which is predicted to print around the 9.0% area and drag the Euro lower.

Current Level: 0.6148 (1.6265)
Resistance: 0.6265 (1.6340)
Support: 0.6120 (1.5960)
Last WeeKs Range: 0.6150-0.6280 (1.5922-1.6261)

The New Zealand Dollar (NZD) bounced off 0.5220 (1.9150) at the weekly close, travelling to 0.5265 (1.9000) early Tuesday. The sideways theme in the cross is still on show, a break past 0.5280 (1.8930) would signal further upside intent. The economic outlook in the UK is looking worse by the day with the BoE eying a recession late this year. The energy crisis and rising costs to households is causing much worry. The UK central bank will have no choice but to continue to raise its benchmark interest rate with predictions we could see a 75-point jump in the September meeting accompanied with a dovish review. Big rate hike moves don’t always indicate a stronger currency as we have seen of late the opposite has applied as the UK economy enters a period of stagnation. A thin economic calendar should leave the markets contemplating big picture themes this week.

Current Level: 0.5252 (1.9040)
Resistance: 0.5330 (1.9400)
Support: 0.5155 (1.8770)
Last Weeks Range: 0.5220-0.5293 (1.8992-1.9157)

The New Zealand Dollar (NZD) found support around the 0.8900 area Monday against the Australian Dollar (AUD) as the pair came off last week’s 0.8890 (1.1250) zone. Stronger than anticipated Australian Retail Sales hasn’t helped the Aussie after figures showed a rise in the July numbers of 1.3% compared to 0.3% expected. Data this week is thin so the recent drivers of this cycle of NZD weakness remain, with the kiwi still under pressure. On the chart the daily close at 0.8795 (1.1370) the July 2015 level could be retested.

Current Level: 0.8915 (1.1208)
Resistance: 0.9110 (1.1390)
Support: 0.8780 (1.0980)
Last Weeks Range: 0.8886-0.9030 (1.1074-1.1253)

Powell’s comments at the Jackson Hole Symposium surprised markets when he gave his view that the Federal Reserve would continue to raise interest rates until they were satisfied that inflation was back under wraps. His comments disappointed analysts who had factored in inflation had peaked and the Fed would shift policy to a less aggressive stance. This spurred a negative reaction sending risk currencies and equity indices lower. The New Zealand Dollar (NZD) dropped to 0.6100 against the US Dollar (USD) as indices fell over 4%. The DOW gave back 1000 points in what was the biggest one decline since May this year and the US Dollar Index pushed to a fresh 2002 high as investors left the building. Traders are split as to a 50-point rise by the Fed in September 40% chance and a bigger rise at 60%, either way the Fed will drive up interest rates until they are satisfied inflation has reached its peak. On the docket this week is Non-Farm Payroll and unemployment figures. If the jobs number for August comes in worse than 295k we expect the NZD to drop.

Current Level: 0.6158
Resistance: 0.6460
Support: 0.6100
Last Weeks Range: 0.6154-0.6250