FX News

Markets were relaxed Monday over the US holiday, The British Pound (GBP) remains in its recent range trading around the 0.5170 ( 1.9340) areas this morning. Momentum tracked ever so slightly with the GBP as risk currencies took a breather. Last week’s rise of 25 points to 1.25% by the Bank of England should continue to support the Pound heading into tomorrow’s UK CPI read which is predicted to rise from 9.0% to 9.1% y/y. One source expects inflation to tick above 10.0%. Retail Sales in the UK releases at the end of the week and should reflect a difficult period for consumers with the number predicted to be around -0.6%. A retest of 0.5090 (1.9650) the 3 months daily high, looks the pick for direction this week.

Current Level: 0.5163 (1.9368)
Resistance: 0.5230 (1.9630)
Support: 0.5095 (1.9630)
Last Weeks Range: 0.5126-0.5195 (1.9249-1.9508)

The New Zealand Dollar (NZD) extended gains Monday against the Australian Dollar (AUD) to the 0.9140 (1.0940) level but was unable to stick around dropping back to 0.9110 (1.0980) the weekly opening area. The key psychological level at 0.9100 could come under pressure today when the RBA minutes are read by Governor Lowe, saying recently the central bank will do everything they can to bring down inflation back to reasonable levels which he predicts could be as high as 7.0% by year end. Commodity markets are back under pressure and Iron Ore has come off 146 over the last few days, trading down to 125 this morning as renewed covid fears in China sparked fresh concerns of further lockdowns. With a national holiday Friday in NZ with Matariki the cross shouldn’t deviate much from current levels.

Current Level: 0.9102 (1.0977)
Resistance: 0.9150 (1.1160)
Support: 0.8960 (1.0930)
Last Weeks Range: 0.8955-0.9108 (1.0979-1.1166)

Risk sentiment improved Monday with the New Zealand Dollar (NZD) pushing to 0.6360 levels against the US Dollar (USD) before falling back this morning to 0.6330 after selling took place. Equity markets were buoyant recovering from last week’s drops but closed the day flat as the US broke for the Juneteenth holiday. Moves to the topside for the kiwi remain limited fundamentally – on the chart we see resistance at 0.6380 the 50% fib area stemming from the recent low at 0.6200 and 0.6550. It’s now predicted that the US economy will encounter a recession over the next 12 months which could spill over onto the UK and Eurozone and other countries. The cost-of-living crisis and the scary effects from rising inflation causing soaring energy costs will almost make things worse over the coming months. It’s certainly a race to the recession start line, remembering the NZ economy already clocked negative growth in the first quarter of 2022. Key data comes in the form of US Manufacturing later in the week. Buyers of the big dollar should consider the recent rise in the cross above 0.6300.

Current Level: 0.6331
Resistance: 0.6560
Support: 0.6210
Last Weeks Range: 0.6192-0.6395

Markets seemed a little annoyed at the Bank of England’s 25 point hike this morning with the view this should have been more. The central bank remains cautious ahead of an economy struggling. The Bank of England (BoE) hiked their cash rate from 1.0% to 1.25% which rallied the GBP post release to 0.5665 (1.7650), it couldn’t consolidate around these levels spilling back to 0.5707 (1.7520). With the UK leading the recession race with the outlook uncertain one gets the impression the central bank is holding back on bigger hikes in light of economic weakness wary of not sending the economy to a howling halt. Aussie job numbers pushed a little higher with the participation rate at 66.7% and the unemployment rate remaining at 3.9%, the labour market remains tight. Key data out next week comes in the form of UK CPI, sitting at 9.0% I’m not sure they can afford this to go much higher.

The current interbank midrate is: AUDGBP 0.5697 GBPAUD 1.7553
The interbank range this week has been: AUDGBP 0.5663- 0.5777 GBPAUD 1.7308- 1.7658

The Euro (EUR), Australian Dollar (AUD) looks like an earthquake seismic chart this week with large swings taking place. Price settled into Friday around 1.4950 with strength back in the Euro with equities coming off overnight- the Nasdaq down over 4.0% at the close of NY. The ECB’s new “anti-fragmentation tool” announced midweek should pave the way for more aggressive tightening hikes later in the year. The tool will give more certainty with predictions of a hike of 25 points in July, 50 points in September, October, and November to cap somewhere around the 1.25% area by the end of 2022. Australian jobs numbers were solid at 60,000 people added to the workforce in May with the unemployment rate staying at 3.9%. We still support upside bias in the short to medium term for the Euro.

The current interbank midrate is: AUDEUR 0.6664 EURAUD 1.5003
The interbank range this week has been: AUDEUR 0.6584- 0.6730 EURAUD 1.4858- 1.5188

The US Dollar (USD has taken a battering in overnight trading against the Australian Dollar (AUD) with the cross reaching 0.7050 early today. It’s been carnage in the markets post Wednesday’s Fed decision when they hiked interest rates from 1.0% to 1.75% in what was seen as the biggest increase since 1994. Most punters were predicting 75 points with some at 100, most of the move already baked into the charts, however. The greenback has been spanked over the past couple of days, the “dollar index” dropping over 3.0%. Usually such a spike in rates would have sent prices lower but since Powell said the July Fed hike could be either 50 or 75 points this rocked markets based on earlier comments suggesting a solid 75 points was already locked in. Aussie job numbers were consistent with an additional 60,000 people being added to the workforce and unemployment remaining at 3.9%, this helped the Aussie push up Thursday. We suspect the cross above 0.7100 could be getting fairly toppish, if you are considering buying.

The current interbank midrate is: AUDUSD 0.7022
The interbank range this week has been: AUDUSD 0.6849- 0.7068

Down the escalator up the lift describes this week’s movement in the Euro (EUR), New Zealand Dollar (NZD) with the kiwi softening through to 0.5935 (1.6850) midweek before bouncing back to post 0.6055 (1.6520) Friday. The ECB’s new “anti-fragmentation tool” announced this week should set the ECB up for more aggressive tightening hikes later in the year. The tool will give more certainty with predictions of a hike of 25 points in July, 50 points in September, October, and November to round off the interest rate at year end somewhere around the 1.25% area. NZ GDP first Q printed yesterday and wasn’t what we were looking for at -0.2% vs 0.3% expected, this follows +3.0% for the first quarter and confirmed the start of what everyone has been wary of – the inevitable looming recession. Up over 0.6000 this represents good buying in our book, buyers should consider.

The current interbank midrate is: NZDEUR 0.6022 EURNZD 1.6605
The interbank range this week has been: NZDEUR 0.5934- 0.6059 EURNZD 1.6504- 1.6851

It’s been a choppy week in the British Pound (GBP), New Zealand Dollar (NZD) pair, in early Friday trading we are around 0.5155 (1.9400) levels post overnights Bank of England Policy and rate hike. We saw no real surprise from the Bank of England hiking 25 points to 1.25% as predicted with the official vote at 6-3 in favour of the hike. The GBP rising on the news but dropping back to pre-release prices. The markets were not convinced for some reason, perhaps a 50-point move may have been the better call, but the central bank looks to be staunch about not raising too hard to combat rising inflation as this could invite more recession fears of which the UK are leading the race on. With the outlook likely to be less certain the banks appetite will remain cautious of over hiking and running the economy to a standstill.

The current interbank midrate is: NZDGBP 0.5147 GBPNZD 1.9428
The interbank range this week has been: NZDGBP 0.5124- 0.5195 GBPNZD 1.9248- 1.9513

What goes down must come up. The New Zealand Dollar (NZD) recovered midweek off 0.6200 levels against the US Dollar (USD) the May 2020 low, posting 0.6395 at the close of NY this morning. NZ GDP for the March 2022 quarter was poor coming in at -0.2% instead of the expected 0.3%. This follows on from the December 3.0% confirming the economy is contracting quickly. A negative result in the second quarter will firmly place the economy in recession. The Federal Reserve raised their cash price 75 points Thursday to 1.75% pulling down bond treasury yields putting the greenback under pressure. Powell confirming the next hike in July may only be a 50 point move higher instead of the prices in 75 points also contributed to the selloff in the big dollar. Overall pressure in the cross remains to the downside all things considered. The fib 50% retracement from the recent high and low signals prices could struggle to push above 0.6400, buyers of USD should consider, especially given this Monday we were pricing under 0.6200

The current interbank midrate is: NZDUSD 0.6341
The interbank range this week has been: NZDUSD 0.6192- 0.6395