FX News

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

Sunday 28/08
Day 3, All, Jackson Hole Symposium

Monday 29/08
All Day, GBP, Bank Holiday

Tuesday 30/08
6:15am, USD, FOMC Member Brainard Speaks
All Day, EUR, German Prelim CPI m/m
Forecast: 0.20%
Previous: 0.90%

Wednesday 31/08
2am, USD, CB Consumer Confidence
Forecast: 97.4
Previous: 95.7
2am, USD, JOLTS Job Openings
Forecast: 10.43M
Previous: 10.70M
3am, USD, FOMC Member Williams Speaks
9pm, EUR, CPI Flash Estimate y/y
Forecast: 9.00%
Previous: 8.90%
9pm, EUR, Core CPI Flash Estimate y/y
Forecast: 4.10%
Previous: 4.00% Read more

Key Points:

RBNZ’s Orr speaking this morning says there will be at least two more rate hikes by the central bank, Orr believes NZ won’t drop into a recession when the third quarter GDP results are published on the 15th of December
The US Government’s latest 3B tranche of military assistance for Ukraine will be welcomed, it includes AeroVironment’s Puma drones and ammunition from General Dynamics
The Jackson Hole symposium in Wyoming starts midweek with Powell speaking midday today on global economic outlook
NZ Retails figures for the June quarter were down 2.3% or a seasonally adjusted 26B
The Australian Dollar (AUD) is the strongest currency this week while the Euro (EUR) is the weakest on the main board of currencies
Bank of Japan’s member Nakamura said the central bank will continue its powerful easing because of the current high inflation and unsustainable energy prices
The Bank of England may look to ramp up its rate hikes over the coming months due to spiralling inflation expectations with recent figures suggesting we may see inflation pricing pass 15.0%
The Euro (EUR has fallen below parity against the US Dollar (USD) to a 0.9900 low earlier this week the first time this has happened since December 2002

The Euro (EUR) continues to depreciate at a great rate of knots against the New Zealand Dollar (NZD) and across the board with ongoing eurozone concerns. The pair traded to 0.6280 (1.5930) Wednesday before recovering slightly Friday to 0.6240 (1.6030). Poor eurozone PMI has markets considering the possibility this will underpin a likely recession. Of note German power prices have hit record highs as the nord stream pipe is set for maintenance from 31st August. German gas and power prices have surged as panic over Russian supplies are causing massive concerns. Meanwhile the ECB minutes confirmed a hike of 50 points is likely at the September meeting over the previously indicated 25 points. Traders seem happy to position for further falls in the cross with key event and geopolitical risk likely to support the NZD for a while longer.

The current interbank midrate is: NZDEUR 0.6235 EURNZD 1.6038
The interbank range this week has been: NZDEUR 0.6147- 0.6280 EURNZD 1.5922- 1.6266

The Australian Dollar (AUD) has been the strongest currency across the board this week, against the British Pound (GBP) it extended its hold reaching 0.5900 (1.6950) overnight a fresh November 2017 high. UK Manufacturing came in light at 46.0 agst 51.0 as demand in the sector has fallen away. A more hawkish leaning Bank of England (BoE) has been doing the rounds of late with predictions their interest rate could peak as high as 4.5% around mid-2023. The GBP is suffering stagnation risks of late. With equity markets closing the day positive we should see the Aussie push higher into the weekly close.

The current interbank midrate is: AUDGBP 0.5892 GBPAUD 1.6972
The interbank range this week has been: AUDGBP 0.5810- 0.5907 GBPAUD 1.6927- 1.7209