FX News

Key Points:

• The stronghold southern port city of Mariupol looks to be in the hands of the Russian forces with the last remaining Ukrainian fighters to be evacuated from inside
• Fed’s Evans calls for rates to be raised to 2.25%- 2.5% as fast as possible “front loading”
• Chinese consumer focused firms are facing increased risk as demand softens, this was confirmed by recent plunging April Retail Sales and Industrial Production results
• The European Central Bank has cut its 2023 economic growth forecast from 2.7% to 2.3%
• BoE Bailey says 80% of inflation is due to prices rises in energy and tradable products
• Crude Oil traded to its highest level since March 28th at 111.20
• Canadian house prices click down as sales volumes drop
• US Stock Indices are down 6 straight weeks
• The Japanese Yen (JPY) is the strongest currency this week with the Australian Dollar (AUD) the weakest.
• Iron ore bounces off 122.00 lows back to 127.00 assisting the AUD higher

What a difference positive sentiment makes to market mood. The New Zealand Dollar (NZD) has pushed up from the weekly open of 0.6260 as risk products rose across the board. Positive US data and Shanghai restrictions have also boosted investor appetite with the cross clocking 0.6360 earlier today. US Retail Sales printed at 0.9% m/m for April slightly lower than the 1.0% predicted but a healthy upwardly revised March number from 0.5% to 1.4% highlighted improved consumer spending. This data suggests we should see decent growth in the second quarter sweeping aside earlier speak of recession risks. Industrial Production also published stronger at 1.1% in April vs 0.4%, the 4th straight monthly gain. The NZ annual Budget is tomorrow at 2pm NZT which doesn’t usually affect movement in the NZD much historically. On the chart, technically the pair is still trading in the bearish channel decline from the 0.7030 high posted in early April. A break above 0.6500 and the 30-day moving average would signal a trend change.

Exchange Rates:
The current interbank midrate is: NZDUSD 0.6364
The interbank range this week has been: NZDUSD 0.6226- 0.6373

Equity markets continued to rally into Wednesday taking the Australian Dollar (AUD) higher against the US Dollar (USD) to 0.7020, this comes as in the wake of another sell off in fixed income. Chinese Retail Sales Monday took price lower to 0.6870 after figures showed a sharp decline of -11.1% vs -6.2%, consumer spending has been hit by recent covid lockdown restrictions. US Core Retail Sales printed at 0.9% m/m for April and March’s numbers were upwardly revised from 0.5% to 1.4% highlighting improved consumer spending trends. Minutes from the RBA meeting on the 3rd of May shows the RBA are more open to a 40-point rise to rates rather than the talked about 15 points move in its hawkish comments, but a 25 point move in the middle of an election campaign is the likeliest outcome with federal elections being held this weekend. We may also see a larger 40 point move at their July meeting. The test heading into the close of the week will be whether the AUD can hold off dropping through 0.7000 again. If we see further rises in risk products the currency should retest the fortnightly high at 0.7075, watch for tomorrow’s wage data which could boost the Aussie.

Exchange Rates:
The current interbank midrate is: AUDUSD 0.7034
The interbank range this week has been: AUDUSD 0.6870- 0.7038

The New Zealand Dollar (NZD), Australian Dollar (AUD) cross continues to consolidate around the recent lows at 0.9050 (1.1050) areas with the Aussie slightly edging out the kiwi this week. The physiological 0.9000 big figure support should hold for a while longer. China’s iron ore demand is expected to surge once Chinese industry is back online post covid lockdowns which in turn could benefit the AUD over the next few months while a backlog of manufacturing orders are filled. Minutes from the RBA (3rd May) confirms the RBA is more open to a 40-point hike in rates over the talked about 15-point move, but a 25 point move in the midst of an election campaign is the likely scenario (6 June). Federal elections are being held this weekend with labour leading the polls. Aussie jobs data tomorrow and next week’s RBNZ rate announcement and statement is in view with the RBNZ expected to hike interest rates to 2.0% from 1.5%.

Exchange Rates:
The current interbank midrate is: NZDAUD 0.9046 AUDNZD 1.1044
The interbank range this week has been: NZDAUD 0.9026- 0.9090 AUDNZD 1.1001- 1.1079

Wednesday 17/05
12AM, USD, FOMC Member Bullard Speaks
12:30AM, USD, Core Retail Sales m/m
Forecast: 0.30%
Previous: 1.10%
12:30AM, USD, Retail Sales m/m
Forecast: 1.10%
Previous: 0.50%
6AM, USD, Fed Chair Powell Speaks
6:30AM, USD, FOMC Member Mester Speaks
1:30PM, AUD, Wage Price Index q/q
Forecast: 0.80%
Previous: 0.70%
6PM, GBP, CPI y/y
Forecast: 9.10%
Previous: 7.00%
Tentative, EUR, ECB Financial Stability Review Read more

Most major commodities traded lower overnight, iron ore slumping to 127.00 from 141.00 in the past few sessions putting enormous pressure on the Australian Dollar (AUD) . Price deteriorated to 0.6840 as risk conditions worsened and focus on the Fed raising rates continues to cause concerns. US Inflation is still running hot despite publishing down at 8.3% in April, this was higher than the predicted 8.1% but dropped from 8.5% the 41 year high published in March. Energy prices rose 31% vs 32% and fuel oil increased a massive 81% vs 70%. The US 10Y Bond yield is down at 2.83% from Monday’s 3.2% signalling possible Fed pain ahead. The safe haven greenback may be flavour of choice for a while yet. On the chart there looks to be nothing but air all the way to support at 0.6720. A retest of this area is a possible outcome over the next few trading sessions. Looking ahead we have US Retail Sales and Australian unemployment data to publish before Australian parliamentary elections start next weekend.

Exchange Rate:
The current interbank midrate is: AUDUSD 0.6874
The interbank range this week has been: AUDUSD 0.6827- 0.7072

Choppy conditions in the New Zealand Dollar (NZD), Australian Dollar (AUD) cross saw price pivot around 0.9090 (1.1000) levels for most of the week, the kiwi avoiding the 0.9000 support area for another week and looks robust. NZ Inflation expectations held at 3.29% out two years, the RBNZ wont to bothered by these numbers and could re-evaluate their tightening lower than forecast over the coming months. This will give more weighting to a soft economic “come down” rather than a potential recession which is brewing. Next week’s key print is Aussie jobs data Thursday. Sellers of AUD should consider these current levels with the RBNZ statement due late May.

Exchange Rates:
The current interbank midrate is: NZDAUD 0.9084 AUDNZD 1.0998
The interbank range this week has been: NZDAUD 0.9041- 0.9124 AUDNZD 1.0960- 1.1060

Same same but different. The New Zealand Dollar (NZD) has plunged to a fresh lows this morning reaching 0.6213 against the US Dollar (USD) as market sentiment remains poor and equity markets under pressure. There has been a lot of fallout since the Fed raised rates 50 points last week. US Inflation is still running hot despite coming in at a lower level of 8.3% in April, this was higher than the predicted 8.1% but down from 8.5% the 41 year high in March. Energy prices rose 31% vs 32% in March and fuel oil increased a whopping 81% vs 70%. Food prices jumped 9.4% the biggest rise since 1981. NZ Inflation expectations yesterday showed no reprieve for lower Inflation over the next while according to RBNZ predictions. The 2 years expectation at 3.29% held most of the focus as it’s the likely timeframe for when the central bank expects monetary policy tightening to have peaked. The one-year forecast came in at 4.88%. The RBNZ said inflation expectations remain anchored around the targeted range between 2-3%, in other words “move on-nothing to see here”. It’s hard to see the kiwi perk up in the near term with everything going on, downside risks remain.

Exchange Rates:
The current interbank midrate is: NZDUSD 0.6248
The interbank range this week has been: NZDUSD 0.6204- 0.6412