FX News

Key Points:

Eurozone July Unemployment Rate holds steady at 6.6% in July
Chinese Manufacturing dives into contraction to 49.5 in August after 50.2 expected
Singaporean Oil tanker Affinity run aground in the Suez Canal but was refloated fast not disrupting the flow of ships into the north
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
Australian Manufacturing PMI drops into contraction – 49.3 for August
The Euro (EUR) has been the strongest currency this week while the British Pound (GBP) earns the spot of the weakest on the main board of currencies
Toyota Motor Company Japan will increase its price of steel it sells by $289 per tonne in October- Toyota is the largest Japanese steel buyer

A solid pushback by the Euro this week has seen prices in the Euro (EUR), Australian Dollar (AUD) cross push back to 0.6790 (1.4730) late Thursday reversing all of last week’s losses. Fitch has come out saying a eurozone recession is imminent as a result of the gas crisis, a full cut of the Russian gas line to the EU looks increasingly likely. Inflation in the Eurozone increased to 9.1% in the month of August, a 25 year high. Interestingly most of the inflation we see now was prior to the Ukraine invasion, made worse by energy spikes and post war sanctions. Next week’s key standout is the RBA release of policy and rates with a hike of 50 points to 2.35% expected. We expect normal Euro weakness to resume next week.

Exchange Rates:
The current interbank midrate is: AUDEUR 0.6825 EURAUD 1.4652
The interbank range this week has been: AUDEUR 0.6784- 0.6936 EURAUD 1.4417- 1.4739

The British Pound (GBP) has slumped to 1.7000 (0.5885) depreciating for the second week running against the Australian Dollar (AUD) hit hard as it clocks a new November 2017 low. No tier one data published over the week made for subdued action, the pair sticking to areas around 0.5900 (1.6950) for most of the week. A real fear is starting to develop over rising inflation in the UK with new reports suggesting it could peak as high as 22%. Continued rises to gas and electricity prices over the winter months could be catastrophic not just for consumer prices but also the value of the Pound. The GBP is threatening to make it a very bleak few months for UK importers if the GBP collapses. Looking ahead we have RBA policy release and interest rate Tuesday and Aussie GDP q/q with 0.8% predicted. By mid-next week we could be pricing the cross at 0.6000 (1.6660) levels.

Exchange Rates:
The current interbank midrate is: AUDGBP 0.5880 GBPAUD 1.7006
The interbank range this week has been: AUDGBP 0.5865- 0.5927 GBPAUD 1.6871- 1.7050

Risk appetite came into play early Wednesday in markets, the Australian Dollar (AUD) not managing to hold prices around 0.6950 against the US Dollar (USD) falling to 0.6770 across the week to a 7-week low. The AUD hit by big picture themes as the global outlook deteriorates and investors buy up the greenback. Earlier US Consumer Confidence printed above expectation reversing 3 consecutive months of declines and weekly unemployment claims improved to 232k both items pushing the US Dollar Index higher. The heavy support line on the chart is 0.6730, a drop below this area could signal greater AUD losses with thin air all the way to 0.6100. We should get a better picture of overall direction next week when the RBA hike rates to 2.35% from 1.85%, comments will also be key.

Exchange Rates:
The current interbank midrate is: AUDUSD 0.6795
The interbank range this week has been: AUDUSD 0.6770- 0.6955

The Euro (EUR) extended last week’s gains posting 0.6075 (1.6460) midweek against the New Zealand Dollar (NZD) off the back of Eurozone inflation data. With the ECB talking more hawkish and German and Eurozone inflation escalating higher (9.1%) the Euro has been well supported over most of the week. Enthusiasm for the Euro dropped away Thursday as the EU gas price cap faded, the EUR giving back profits to 0.6130 (1.6320). Next week the ECB meet and will most likely raise their cash rate a whopping 75 points to contain record inflation, the weakness in the Euro will also be a key consideration.

Exchange Rate:
The current interbank midrate is: NZDEUR 0.6107 EURNZD 1.6374
The interbank range this week has been: NZDEUR 0.6069- 0.6178 EURNZD 1.6184- 1.6476

Thin data this week in the English Pound (GBP), New Zealand Dollar (NZD) has seen the cross remain in its sideways pattern. Edging higher off the open of 0.5216 (1.9170) to 0.5268 (1.8980) areas Friday confirming the slow week. Talk of a crumbling UK economy with inflation occupying headlines and predictions we may see it as high as 22% a post was record are concerning, especially if we see the wholesale price of electricity and gas continues to spiral over the UK winter. Next week’s economic docket also looks nude with only the Bank of England Policy Report Hearings to release. The GBP is in serious trouble if the above becomes a reality- the UK economic forecast has recently been downgraded. Selling GBP around current levels may look extremely attractive in a few months’ time. Consider.

Exchange Rates:
The current interbank midrate is: NZDGBP 0.5263 GBPNZD 1.9000
The interbank range this week has been: NZDGBP 0.5223- 0.5294 GBPNZD 1.8888- 1.9143

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)