FX News

We saw added volatility in the New Zealand (NZD), Euro (EUR) cross this week with economic data raising eyebrows. Monday’s NZ CPI read pushed higher to 7.3% up from 6.9% in the first quarter and above the forecasted 7.1% predicted. The news took the pair to 0.6065 (1.6490) from the weekly open around the 0.6120 (1.6340) area. The ECB raised their cash rate 50 points overnight lifting the rate to zero. The first time they have raised rates in 11 years. Consumers will no longer be paying banks to store their funds. The ECB unveiled a plan to buy debt of Europe’s most valuable economies as it takes aggressive action to bring down skyrocketing inflation and slowing economic growth. Post the release the kiwi made back earlier losses trading to 0.6120 (1.6350) into Friday morning. French and German Manufacturing data will close out the week tonight and is forecast to disappoint. Downside risks for the kiwi remain.

EXCHANGE RATES:
The current interbank midrate is: NZDEUR 0.6113 EURNZD 1.6358
The interbank range this week has been: NZDEUR 0.6044- 0.6157 EURNZD 1.6240- 1.6544

The Australian Dollar (AUD) extended gains made late last week bouncing off a low of 0.6680 climbing into Friday to reach 0.6930 against the US Dollar (USD)- the best performing week for the AUD since February this year. The run was cut short briefly Wednesday on weak survey data and a pork products foot and mouth scare coming out of Indonesia and China into Australia. US Home Sales came in poor with speculation the market is about to collapse. The largest US home builder D.R.Horton lowered its build forecast from 83,000 from 90,000 previously, however not all are convinced with strong jobs creations on the horizon. Chart patterns suggest the Aussie may come up against stern resistance around the 0.6980 -0.7000 area based on the 50% retracement of the recent high at 0.7265 and low at 0.6700. Any upside towards this area should be considered seriously for buyers of USD as long-term trend considerations still point to the downside.

Exchange Rate:
The current interbank midrate is: AUDUSD 0.6920
The interbank range this week has been: AUDUSD 0.6780- 0.6937

A slew of US Data misses’ midweek saw the New Zealand Dollar (NZD) extend last week’s run off 0.6040 to clock 0.6270 yesterday vs the US Dollar (USD). US Home Sales fell to a 2 year low as surging borrowing cost deterred buyers and the Philly Fed Manufacturing Index declined in July -12.3% as manufacturing company orders were cut. Monday’s NZ CPI read pushed higher to 7.3% up from 6.9% in the first quarter and above the forecasted 7.1% predicted taking the NZD briefly lower. The kiwi may continue its upward trend towards 0.6300 areas, the Fibonacci 50% resistance level identified on the chart if US equity indices post gains over the coming days. The Nasdaq is on 6 days winning streak. Looking into next week we have the Fed funds rate announcement predicted to rise from 1.75% to 2.5-2.75%

Exchange Rate:
The current interbank midrate is: NZDUSD 0.6240
The interbank range this week has been: NZDUSD 0.6140- 0.6271

The Australian Dollar (AUD) mostly traded around the 0.6745 (1.4830) area over the week against the Euro (EUR) consistent with last week’s low-key moves. The ECB raised their cash rate 50 points overnight, lifting the rate to zero for the first time in 8 years and the first time they have raised rates in 11 years. European banks will no longer receive interest on consumer deposited funds. The ECB unveiled a plan to buy debt of Europe’s most valuable economies as it takes aggressive action to bring down skyrocketing inflation and slowing economic growth. The news weakened the EUR, improving the Aussie to a new high of 0.6785 (1.4740), an early May high. Looking ahead to next week we have key Aussie Q CPI Wednesday.

Exchange Rates:
The current interbank midrate is: AUDEUR 0.6778 EURAUD 1.4753
The interbank range this week has been: AUDEUR 0.6710- 0.6787 EURAUD 1.4732- 1.4907

The New Zealand Dollar (NZD), Australian Dollar (AUD) pair looks to have consolidated around the 0.9030 area into Friday after starting the week at 0.9100 (1.1000) levels. The cross tested 0.9000 in the morning session but failed to break the 5-week support bouncing as it has done many times over the weeks. Monday’s NZ CPI read pushed higher to 7.3% rising from 6.9% in the first quarter and above the forecasted 7.1% predicted sending the kiwi lower. Iron Ore prices are struggling to stay above 100.00 per tonne, hovering at 100.50 currently coming off a five week decline from 146.00 as the Chinese govt establishes a new organisation in order to support local Chinese steel producers. Last year China paid more than 130B for Australian ore, the biggest export out of the country by a wide margin. Key data out next week comes in the form of Australian CPI (second quarter) and is forecast to tick higher from 5.1%

Exchange Rates
The current interbank midrate is: NZDAUD 0.9016 AUDNZD 1.1084
The interbank range this week has been: NZDAUD 0.9006- 0.9101 AUDNZD 1.0987- 1.1103

Key Points:

The Euro traded below parity Tuesday against the US Dollar- the first time since December 2002
The Chinese city of Wugang is to be locked down for 3 days – population is just under 1M
The World Health Organisation have identified a new strain of Covid- this is named BA 2.75 and is possibly more transmissible than prior variants
Japan’s finance minister Suzuki has been on the wires expressing concerns for the Japanese Yen and its path of weakness, he said the B0J will act and intervene if they feel they must
US CPI expected to be 8.6% came in at 9.1% the highest since 1980
RBNZ raises interest rate from 2.0% to 2.5% as expected
IMF cuts US GDP growth to 2.3% from 2.9%- 2023 also slashed from 1.7% to 1.0%
We expect the Fed interest rate to reach a peak of 3.5% in February 2023 before cuts start around September to late next year
The US Dollar (USD) is the strongest currency this month (July) while the Euro (EUR) is trading at the weakest.
The Bank of England will hike rates in their August meeting from 1.25% to possibly 1.75%, the BoE governor Bailey is saying inflation will come down a lot in 2023 raising the question of unnecessary over aggressive hikes forecast
The Bank of Canada surprised markets when they raised rates a whole 1% overnight to 2.50% – markets were picking a 75-point move, the BoC highlighting there was more to come

From last week’s low of 0.6495 (1.5400) the Euro (EUR) has been hammered. The Australian Dollar (AUD) extended its run through to 0.6765 (1.4780) early Wednesday, the Eurozone energy crisis having a major effect on the currency breaking down. Overnight the Euro has gained to 0.6715 (1.4890) with equity markets all posting losses affecting risk flows. German and Eurozone economic sentiment reads came in well below expectation as businesses predict tighter economic conditions ahead. Looking ahead we have Aussie job’s data this afternoon with predictions of unemployment clicking lower to 3.8% which may improve the AUD

The current interbank midrate is: AUDEUR 0.6734 EURAUD 1.4850
The interbank range this week has been: AUDEUR 0.6677- 0.6721 EURAUD 1.4878- 1.4975

The New Zealand Dollar (NZD) run against the Euro (EUR) from last week’s low of 0.5906 (1.6930) continued this week with the kiwi posting a fresh high of 0.6130 (1.6320) an early May high. The Euro pushed back early today on risk aversion to 1.6410 despite German and Eurozone economic sentiment releasing dire. German CPI printed at 0.1% for June as expected, y/y (prelim) inflation prints at the end of the month and may reflect further softening in prices from the current 7.6%. The ECB are predicted to raise their interest rate over the coming months to a peak of 2.0% in March next year. Buying EUR above 0.6000 looks attractive.

The current interbank midrate is: NZDEUR 0.6098 EURNZD 1.6398
The interbank range this week has been: NZDEUR 0.6062- 0.6129 EURNZD 1.6314- 1.6494

Movement in the New Zealand Dollar (NZD), British Pound (GBP) remains choppy with the cross preferring to trade sideways within recent ranges of late. The RBNZ rate announcement yesterday became a non-event as market participants were mostly disinterested after the RBNZ raised rates to 2.5% from 2.0% as predicted. Just shows how much this anticipated release was priced into the currency already. The target inflation rate remains at 1-3%, Governor Ore saying they would tighten at speed until they feel satisfied that measures were working to lower rising inflation. Indications by the RBNZ were that the interest rate would peak at around 4.0% in mid-2023. UK growth overnight came in at 0.5% vs 0.1% expected for the month of May after a decline of -0.2% in April. The threat of a recession is in the balance now over the coming months.

The current interbank midrate is: NZDGBP 0.5153 GBPNZD 1.9406
The interbank range this week has been: NZDGBP 0.5126- 0.5180 GBPNZD 1.9302- 1.9505