FX News

The New Zealand Dollar (NZD) extended last week’s rise from the low of 0.6000 Monday against the US Dollar (USD) edging higher to 0.6160. European and US equities posted gains helping risk currencies to improve. Greenback profit taking has also helped the kiwi recover off the yearly low. The New Zealand economy looks set to possibly avoid dipping into a recession with data out Thursday which should confirm the economy is expected to expand by around 1.0% in the second quarter of 2022. This comes after a contraction in the first quarter of -0.2%. With covid and border restrictions eased the economy has rebounded from the Omicron pandemic. We still have a way to go with ongoing labour  and supply chain material shortages. The long-term chart pattern suggests we could see upside to 0.6300 over coming days.

Current Range: 0.6144
Resistance: 0.6420
Support: 0.6000
Last Weeks Range: 0.5996-0.6152

Market Overview

Key Points:

• Queen Elizabeth II has died at age 96, the longest reigning monarch in British History. Oldest son Charles becomes the new monarch and will be known as King Charles III
• 14 countries recognise the British Monarch as the head of state, over the coming months could we see the unwinding of many to become republics
• US Equities have closed higher- the 4th consecutive day
• Germany has decreased imports of goods from Russia by 45.0% July to July, but the value of goods has increased by 10% to 2.9B highlighting the increased costs of goods and soaring energy prices
• Ukraine troops have taken back a massive chunk of land from Russia freeing more than 20 settlements boosting Ukrainian mood across the country
• The Swiss Franc (CHF) been the strongest currency over the past week while the Japanese Yen (JPY) is the weakest on the main board
• Tens of millions of people over at least 30 regions in China have been ordered to stay home under partial or full lockdowns, residents have been complaining of food and essential item shortages Read more

Monday 12/09
All Day, CNY, Bank Holiday
6:00PM, GBP, Bank Holiday
Forecast: 0.30%
Previous:-0.60%

Tuesday 13/09
1:30PM, AUD, GDP m/m
Previous: 7

Wednesday 14/09
12:30am, USD, NAB Business Confidence
Forecast: -0.10%
Previous: 0.00%
12:30am, USD, CPI m/m
Forecast: 0.30%
Previous: 0.30%
6:00PM, GBP, Core CPI m/m
Forecast: 10.10%
Previous: 10.10% Read more

The Euro (EUR) has rallied to 0.6720 (1.4880) Thursday against the Australian Dollar (AUD) extending early week gains before settling this morning around 0.6755 (1.4800). The European Central Bank hiked their cash rate 75 points to 1.25% overnight joining other central banks in the fight against rising inflation, they signalled they would hike again in the coming months. The ECB is predicted to be at 1.75% early in 2023 but they may pause for a while if looming recession fears become a reality. Earlier the RBA hiked their interest rate by 50 points to 2.35% – the fifth consecutive hike from May 3rd this year, some are arguing this is too much too quick and could tip the economic balance into recession quicker. Momentum in the pair is still to the downside with ongoing Eurozone energy issues.

Exchange Rate:
The current interbank midrate is: AUDEUR 0.6756 EURAUD 1.4801
The interbank range this week has been: AUDEUR 0.6719- 0.6865 EURAUD 1.4566- 1.4881

For most of the week the British Pound (GBP) sat around 0.5860 (1.7060) against the Australian Dollar (AUD) recovering off the early week level of 0.5930 (1.6870) The UK government’s plans to ease the country’s energy crisis may come under massive constraints. Newly appointed Prime Minister Truss plans to cap the energy bill rises to help households. This cost is predicted to be an estimated GBP 170B, funding this will require finesse. The RBA delivered its fifth consecutive rate hike raising 50 points to 2.35%- Lowe saying he had no preconceived idea of exactly where the rate may end up peaking at. Next week’s UK CPI y/y will be one to watch with predictions of well over 10% printing. Fundamentally the GBP still looks heavy

The current interbank midrate is: AUDGBP 0.5871 GBPAUD 1.7032
The interbank range this week has been: AUDGBP 0.5837- 0.5927 GBPAUD 1.6870- 1.7132

The Australian Dollar (AUD) rose briefly post the RBA cash rate release Tuesday to 0.6830 but most of the last few days it has spent time on the backfoot with risk sentiment struggling. The RBA hiked their cash rate 50 points to 2.35% as widely predicted the 5th consecutive hike from May’s 0.10% with some considering the question- have the RBA gone too far too quickly bringing into play a closer recession? Lowe said more hikes will be required but at a slower pace. Lowe is unsure where the peak may be, incoming data should give more clues. The AUD should get relief off the 0.6700 heading into the close.

Exchange Rate:
The current interbank midrate is: AUDUSD 0.6764
The interbank range this week has been: AUDUSD 0.6697- 0.6832

The Euro (EUR) pushed through to 0.6035 (1.6570) Thursday against the New Zealand Dollar (NZD) extending its run off 0.6170 (1.6200) Monday better bid based on a risk off sentiment and the ECB raising rates. The ECB has joined other central banks in raising cash rates 75 points in one hit, the ECB overnight hiking to 1.25%. They have signalled further hikes but will weigh up how much based on prospects of a recession. The overall situation fundamentally for the EUR will continue to be problematic with the currency staring down a deepening energy disaster.

Exchange Rates:
The current interbank midrate is: NZDEUR 0.6062 EURNZD 1.6496
The interbank range this week has been: NZDEUR 0.6034- 0.6162 EURNZD 1.6226- 1.6572

The New Zealand Dollar (NZD) underperformed over the week against the US Dollar (USD) falling briefly below 0.6000 the figure to 0.5995 recovering to 0.6050 into Friday sessions. The move lower a by-product of markets digesting global themes, Fed hawkishness and consequences of deteriorating energy markets with costs ballooning. The Fed seen to be on a path to raise rates again later this month to 3.25% , Powell saying he will continue with the tightening cycle to reduce inflation even if it increases unemployment. Next week’s NZ GDP for the second quarter will confirm in the NZ economy officially drops into a recession. Growth predictions are expected to print just above zero. The kiwi will be doing well to hold 0.6000 in the coming days.

Exchange Rate:
The current interbank midrate is: NZDUSD 0.6068
The interbank range this week has been: NZDUSD 0.5995- 0.6127

It’s been a bit of a nothing week for the British Pound (GBP), New Zealand Dollar (NZD) with not a lot to report data wise. The GBP recovered off 0.5320 (1.8800) levels to 0.5235 (1.9100) and came into Friday around 0.5265 (1.9000) on the news the Queen had died. Very sad. Against the US Dollar the Pound has dropped to its lowest level of 1.14 since 1985 after the GBP came under pressure from dovish remarks made by BoE speakers and criticism around the proposed energy bill plan. Next week’s UK CPI y/y and Bank of England official cash rate should give us excitement with predictions of a hike of 50 points to 2.25%

Exchange Rates:
The current interbank midrate is: NZDGBP 0.5266 GBPNZD 1.8989
The interbank range this week has been: NZDGBP 0.5230- 0.5323 GBPNZD 1.8784- 1.9120

Off the weekly open the Australian Dollar (AUD) initially tracked lower to 1.11 (0.9010) levels against the New Zealand Dollar (NZD) but soon stabilised around the 1.1140 (0.8975) area where it has been most of the week. The RBA didn’t disappoint when they hiked a further 0.5% to 2.35%, the fifth consecutive hike since May as governor Low is committed to returning inflation to the 2-3% band. The path to lower inflation is a narrow window with uncertain times ahead and economic data starting to deteriorate which could lead to a faster recession if the central bank gets this wrong. Looking ahead we have NZ GDP q/q Thursday followed by Aussie employment data. The NZ economy is toying with recession, it will be a close call. Aussie buyers should keep the upper hand for a while.

The current interbank midrate is: NZDAUD 0.8971 AUDNZD 1.1138
The interbank range this week has been: NZDAUD 0.8946- 0.9007 AUDNZD 1.1102- 1.1178