FX News

The poor Euro (EUR) “hasn’t had a look in” this week extending declines against the Australian Dollar (AUD) to 0.7000 (1.4290) in morning trading. The first time we have seen 0.70 the big figure in the pair since April 2017. We have a way to go before we see the 2013 high of 0.7360 but anything is possible with ongoing Eurozone inflation and energy price rises expected to continue. Poor eurozone PMI has analysts weighing in on the possibility this will underpin a likely recession. 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 drops in the cross with key event risk supporting the AUD.

The current interbank midrate is: AUDEUR 0.6991 EURAUD 1.4304
The interbank range this week has been: AUDEUR 0.6845- 0.7005 EURAUD 1.4277- 1.4606

The Australian Dollar (AUD) pushed higher over the week against the US Dollar (USD) as risk markets improved post the interest rate cut by the Bank of China. In efforts to stimulate the economy the PBOC announced a surprise cut from 2.75% to 2.50%. The Aussie rallied to 0.6980 where it currently sits. Fed officials said yesterday on TV that it was uncertain how much the Fed will raise rates at next month’s Fed meeting. Although high inflation calls for tighter policy, they are not ready to commit to the size of the next hike, this could be 75 or 50 points. Opinions by members are suggesting inflation may ease over the coming months which could change things dramatically. Further rises in the cross may be limited as the AUD looks a tad overbought.

The current interbank midrate is: AUDUSD 0.6972
The interbank range this week has been: AUDUSD 0.6854- 0.6989

The New Zealand Dollar (NZD), British Pound (GBP) has consolidated this week around the 0.5265 (1.90) zone with not a lot of action going on. Manufacturing data was poor, the index releasing at 46.0 agst 51.0 predicted with a slowdown in business activity across the sector evident. NZ Retail Sales declined 2.3% against expectations ending the June quarter highlighting a proper drop in spending volumes which will become worse over the coming months. It should be a quiet end to the week’s trading.

The current interbank midrate is: NZDGBP 0.5253 GBPNZD 1.9036
The interbank range this week has been: NZDGBP 0.5227- 0.5293 GBPNZD 1.8891- 1.9129

The big mover this week has been the Australian Dollar (AUD), appreciating over most major currency pairs and outperforming the New Zealand Dollar (NZD) to 0.8930 (1.1200). It’s been a while since we have seen such a decisive move by the AUD, extending last week’s push from 0.9090 (1.1000) to the September 2015 current level. NZ Retail Sales q/q printed down on expectations at -2.3% vs 1.7% expected putting the kiwi under pressure. Omicron knocked consumer spending in the first half of the year raising prospects of a pending recession. Sellers of AUD should consider at current levels, anything under 0.9000 historically is considered fantastic levels.

The current interbank midrate is: NZDAUD 0.8915 AUDNZD 1.1211
The interbank range this week has been: NZDAUD 0.8915- 0.9030 AUDNZD 1.1074- 1.1217

Poor data out of the US midweek has helped the New Zealand Dollar (NZD) to push up from the 0.6150 low against the US Dollar (USD) to clock 0.6250 early this morning. Risk flows returned after China’s decision to take more action from an underperforming economy and concerning housing market situation was well received by markets. The PBOC cut their interest rate from 2.75% to 2.5% in a surprise move sending a strong message to policy makers suggesting they will do whatever it takes. Topside moves may be limited with recent chart moves indicating 0.6280 looks well overbought territory and shifts back to 0.6050 retesting the prior low look possible over the coming days.

The current interbank midrate is: NZDUSD 0.6217
The interbank range this week has been: NZDUSD 0.6155- 0.6249

Market Overview

Key Points:

• Markets kick off the week in a bad mood with equity markets all down as the realisation of a slow path of economic recovery looms
• The Jackson Hole symposium in Wyoming starts midweek
• Canadian Retail Sales up 1.1% in June vs 0.4% forecast
• The US Dollar (USD) is the strongest currency this month while the British Pound (GBP) and the Japanese Yen (JPY) are the weakest on the main board of currencies
• The PBOC has cut their interest rate in efforts to boost economic activity as the economy struggles to recover from the second quarter slowdown
• Russia will close the Nord Stream pipeline for 3 days which has sent gas prices soaring
• The world bank has warned of 80’s style debt crisis with higher-than-expected interest rates, the ongoing threat to covid lockdowns and supply chain concerns
• The Euro (EUR has fallen below parity against the US Dollar (USD) to 0.9942 this morning the first time this has happened since December 2002 Read more

Investor flows have seen the Australian Dollar (AUD) recover last week’s losses against the Euro (EUR) with price rebounding to 0.6925 (1.4440) this morning from the open at 0.6850 (1.4600). Economic data out of the eurozone of late continues to inflict pain on the EUR with the energy situation and souring inflation a major concern for the European central bank who has been slow to react. German and French Manufacturing won’t be pretty when they release tonight and could spike the AUD. A retest of the April 2017 high at 0.6960 (1.4370) looks imminent. It’s a quiet week of Australian data, we expect the Aussie to outperform this week.

Current Level: 0.6922 (1.4446)
Resistance: 0.6955 (1.4700)
Support: 0.6800 (1.4379)
Last Weeks Range: 0.6796-0.6955 (1.4377-1.4714)

The English Pound (GBP) has extended losses against the Australian Dollar (AUD) slumping to 0.5845 (1.7100) this morning from last week’s low of 0.5750 (1.7400). The GBP has been struggling in the aftermath of UK PSNB numbers with borrowing higher than forecast as inflation pushes interest payments higher. Debt servicing is up 80% from a year ago. Markets are pricing in a further 2.0% of hikes through to next February. UK Manufacturing is predicted to come in light tonight which may put added pressure on the GBP, certainly a breakthrough 0.5880 (1.7000) is on the cards the November 2017 high.

Current Level: 0.5847 (1.7102)
Resistance: 0.5875 (1.7270)
Support: 0.5790 (1.7020)
Last Weeks Range: 0.5736-0.5884 (1.6993-1.7432)

The Australian Dollar (AUD) lengthened its decline against the US Dollar (USD) this morning dropping to 0.6860 after a short trip to 0.6930 wasn’t sustained. Risk off mood has been mostly to blame with equity markets closing down over 2.0% on the day and talk of the Chinese currency (RMB) being devalued. Iron ore also won’t be helping as it continues its August decline to 101.00 this morning from 117.00 as the demand for Chinese industrial production extends its downturn. A thin calendar this week should ensure the cross gets its moves from global geopolitical outcomes. A drop past 0.6860 and the AUD looks vulnerable.

Current Level: 0.6883
Resistance: 0.7130
Support: 0.6720
Last Weeks Range: 0.6859-0.7123

The Euro (EUR) is under pressure as we head into the new week as markets contemplate heavy “risk off” sentiment. The New Zealand Dollar (NZD) rose to 0.6210 (1.6100) in early Tuesday trading and could extend gains heading into tonight’s French and German Manufacturing reports tonight. The energy crisis has not been friendly to the Euro over recent weeks and again looks to be the main driver of the EUR weakness. Chiming in is rocketing inflation and a poorly formed central bank response all continue to weigh. NZ Retail Sales Thursday could push the kiwi higher with predictions of a bumper result.

Current Level: 0.6214 (1.6092)
Resistance: 0.6310 (1.6370)
Support: 0.6110 (1.5850)
Last Weeks Range: 0.6146-0.6309 (1.5850-1.6270)