FX News

The New Zealand Dollar (NZD) reached a 7-week low Monday of 0.6120 (1.6350) against the Euro (EUR) as risk conditions were poor entering the week. Stress around the fallout in the war between Ukraine and Russia remains the main driver of markets with global concerns at the forefront of everyone’s minds. Fears Russia may stop gas supplies to European countries that won’t pay Rubles has taken a heavy toll in recent sessions. The kiwi bounced back to 0.6220 (1.6070) last night but this move looks to be only a blip as “risk off” conditions could dominate moves into the weekend. Looking ahead we have NZ employment data publishing Wednesday with expectations the unemployment rate could go lower yet from the current 3.2%.

Current Level: 0.6190 (1.6155)
Resistance: 0.6250 (1.6300)
Support: 0.6135 (1.6000)
Last Weeks Range: 0.6144-0.6288 (1.5902-1.6275)

“Old Mable” (GBP) has been “offered” across the board this week, coming off 0.5150 (1.9420) Monday versus the New Zealand Dollar (NZD), recovering losses to 0.5245 (1.9070) into late Thursday sessions. This week’s “risk off” market surroundings would usually support the kiwi but with the Pound publishing awful economic data of late the kiwi has enjoyed a run of form. UK debt service and public sector wage costs have exploded as well as BoE Bailey pitching a less than hawkish tone. All eyes will be on next week’s NZ employment data with the unemployment rate expected to come in lower than the current 3.2%. Also, key Bank of England monetary policy and cash rate is Thursday with market consensus predicting the BoE raising rates from 0.75% to 1.0% with questions to be raised over their selling of QE/Bonds. With both central bank hiking in the short term, it’s tough to gauge direction or a potential break either way.

Current Level: 0.5212 (1.9185)
Resistance: 0.5255 (1.9500)
Support: 0.5130 (1.9030)
Last Weeks Range: 0.5136-0.5216 (1.9129-1.9469)

The New Zealand Dollar (NZD) retraced higher moves in early week trading against the Australian Dollar (AUD) back to 0.9240 (1.0820) as kiwi outperformed. Australian Inflation has surged again from 3.5% to 5.1% year on year surpassing market estimates of 4.6% marking the highest read since the early 2000’s and adding more pressure for the RBA to hike and hike hard. Risk off conditions backed the AUD into Thursday with prices down at 0.9175 (1.0900). Prospects that the RBA will hike next week will make it tough for the kiwi to catch a break over the next few sessions, with inflation now well above the 2-3% band, the RBA will rapidly bring in a tightening phase starting with a rise of 0.15% next week and another one in June. Also on the economic docket next week is NZ employment figures expected to be bumper and may give the NZD a push.

Current Level: 0.9178 (1.0886)
Resistance: 0.9275 (1.1000)
Support: 0.9090 (1.0780)
Last Weeks Range: 0.9092-0.9195 (1.0875-1.0998)

The New Zealand Dollar (NZD) continues to sell off against a stronger US Dollar (USD) towards pivotal support at 0.6520. Broad concerns over the war in Ukraine and consensus that the Fed will raise rates to curb rising inflation have helped the big dollar of late. Although equity markets had a better session overnight regaining some of the earlier week losses the kiwi still struggled. US Consumer Confidence released slightly down at 107.3 from the 108.5 predicted as expectations of further inflation is on everyone’s minds. US Advanced GDP is expected to print around 1.1% for Q1 compared to 6.9% in the 4th Q which may give the kiwi scope for upside moves. Next week’s calendar is action packed with NZ employment data and US Non-farm payroll releasing. Also, we have the Federal Reserve rate and policy announcement which should give us more clues as to how the Fed will continue to tighten policy. A drop below 0.6500 (Sep 2020 level)  may indicate more downside in the cross.

Current Level: 0.6531
Resistance: 0.6700
Support: 0.6520
Last Weeks Range: 0.6625-0.6813

In the past couple of days the Australian Dollar (AUD), Euro has moved from 0.6880 (1.4540) to this morning’s 0.6800 (1.4710) as market risk tone deteriorates and equity markets return to recent lows. The Euro buoyed also by the ECB highlighting they will be ending their asset purchases program by the end of the 3rd quarter and hiking rates possibly in their July meeting. Inflation is only 2.9% at the moment, not exactly massive but with uncertainty in the Ukraine war causing huge supply chain issues and rising energy and consumer prices it’s predicted to go much higher. On the lookout next week is the French election and Australian quarterly CPI. We predict the pair to retrace moves to 0.6835 (1.4630) into the weekly close.

Exchange Rates:
The current interbank midrate is: AUDEUR 0.6797 EURAUD 1.4712
The interbank range this week has been: AUDEUR 0.6790- 0.6878 EURAUD 1.4539- 1.4726

Expected moves for the Australian Dollar (AUD) through 0.7500 stalled midweek against the US Dollar (USD) with the pair reaching 0.7460 before swan diving to 0.7370 early Friday. Equity prices and commodities were hit hard including iron ore back at 146.00 per tonne. China has said they would cut steel output in 2022 adding demand concerns for the resource led Australian economy. To make things worse China Steel regions are back in covid lockdown restrictions. Fed speak confirmed they could hike interest rates over the next 3 months by 50 points apiece to around 3.0% in early 2023. It’s been over 50 years since the Fed have decreased the cash rate in less than 8 months from any hike, analysts are predicting slower growth prospects in 2023-2024 as inflation returns to normal thus this could create the perfect storm and recession if they don’t get the balance of the economy right. Next week’s Aussie CPI could print higher than 4.0% making this a 14 year high. We think the AUD may just underperform over the following few days.

Exchange Rate:
The current interbank midrate is: AUDUSD 0.7366
The interbank range this week has been: AUDUSD 0.7386- 0.7456

A risk off tone has seen the Euro (EUR) pick up the pace this week against the New Zealand Dollar (NZD) posting a 3 week low in the pair of 0.6210 (1.6100) heading into Friday. This comes as the RBNZ’s inflation spiked to a 30 year high of 6.9% midweek, slightly lower than expectations of 7.1% and surprisingly not moving the kiwi higher. The ECB left their cash rate unchanged last week but said their asset purchases could come to an end in the third quarter. Lagarde speaking overnight said Eurozone economic risks are skewed to the downside with core inflation at 2.9% and “manageable”. The Euro is certainly buoyed by prospects of rate hikes starting in July, this coupled with risk off markets and we could see a further slide in the pair over the coming week’s war dependant.

Exchange Rates:
The current interbank midrate is: NZDEUR 0.6205 EURNZD 1.611
The interbank range this week has been: NZDEUR 0.6205- 0.6287 EURNZD 1.5904- 1.6116

The British Pound (GBP) looks to close the week out strong, edging ahead of the New Zealand Dollar (NZD) for the third week straight after moving off 0.5230 (1.9130) to 0.5230 (1.9360) a new five week low. Risk markets are down with equities back at weekly lows and commodity prices retracing. The RBNZ raised its cash rate from 1.0% to 1.5% last week in the fight against rising inflation- turns out the right move as inflation y/y ballooned out to 6.9% yesterday marginally lower than the 7.1% predicted but still a 30 year high. For the quarter this equates to 1.8% less than the 2% estimate but well down on where we think “true” inflation lies. Initially the release pushed the kiwi higher but in the hours following price had dropped. Bank of England’s Bailey commented overnight “we are in a period of unprecedentedly large shocks” with short term inflation expectations increasing. Bailey will speak more on inflation tomorrow, heading into the weekly close we think price is skewed to the downside.

Exchange Rates:
The current interbank midrate is: NZDGBP 0.5160 GBPNZD 1.9379
The interbank range this week has been: NZDGBP 0.5162- 0.5227 GBPNZD 1.9128- 1.9371