FX News

NZ CPI grew to the highest level in over 30 years yesterday when it jumped year on year to 6.9% slightly lower than the predicted 7.1%. For the quarter this rise of 1.8% and much lower than it should have been – god only knows where some of these statistical numbers are calculated from. The New Zealand Dollar (NZD) sat just around the 0.6750 area over the release then began to underperform into late Thursday sessions. Risk conditions and equities are down at weekly low’s overnight, the NASDAQ falling over 2% taking the fragile NZD to 0.6730 this morning, the biggest single session fall in months. US Fed’s Daly was on the wires talking up several 50 point rate hikes which spooked markets considering first quarter earnings reports forecasts could be soft. A retest of the 7 week low at 0.6710 looks possible heading into the weekly close. Looking ahead we have advanced US GDP q/q on the radar.

Exchange Rates:
The current interbank midrate is: NZDUSD 0.6724
The interbank range this week has been: NZDUSD 0.6714- 0.6812

The long range trend in the Australian Dollar (AUD) continues to dominate the chart, the currency continuing to outperform the New Zealand Dollar (NZD) over the last 6 weeks. The cross clocking an August 2020 level of 0.9100 (1.0990) Thursday before falling back to 0.9130 (1.0950) earlier today. Growth momentum in the Australian economy is starting to look positive with GDP forecast to be around 5.5% this year driven by massive spending by households. Towards year end this will slow with interest rates expected to be hiked leading into a subdued 2023. NZ Inflation rose to a 30 year high of 6.9% this week confirming more interest rate hikes on the horizon. The NZD was broadly up post release but was sold off in the hours after. A hike of 50 points instead of 25 in the May meeting looks all but factored in. With commodity prices roaring it’s hard to see any downside developing in the AUD for a while although we predict 0.9000 (1.1100) should hold.

Exchange Rates:
The current interbank midrate is: NZDAUD 0.9126 AUDNZD 1.0947
The interbank range this week has been: NZDAUD 0.9095- 0.9195 AUDNZD 1.0875- 1.0995

The Australian Dollar (AUD) remains the currency of choice for traders as it outperforms across the board. Against the US Dollar (USD) it holds firm in its bull trend despite falling from a lofty 0.7650 last week to 0.7395 yesterday. Improvements overnight with equity markets posting profits has the cross back at 0.7450 at the bottom of the recent range and poised to push higher we believe. Today’s Australian jobs data should boost prices with expectations of a bumper unemployment read at under 4%. US inflation rose to 8.5% in March up from February’s 8.4% the highest since December 1981 increasing stakes of rapid tightening by the Federal Reserve over the coming months opening up broad based big dollar demand. It certainly will be a good tussle between the two central banks, for now we support further upswings and a retest eventually of 0.7580.

Exchange Rate:
The current interbank midrate is: AUDUSD 0.7452
The interbank range this week has been: AUDUSD 0.7390- 0.7493

Risk sentiment has driven price moves this week in the Australian Dollar (AUD), Euro (EUR) pair, pushing higher to 0.6905 (1.4480) before slipping to 0.6840 (1.4620) into Thursday trading as equity markets improved overnight. The war between Ukraine and Russia entered the 50th day of battle with the Ukrainian President Zelenskiy saying the war will become an “endless bloodbath” without more weapons. Zelenskiy said the Ukrainian people have been defending itself far longer than the Russian army had planned. Justin Trudeau has followed calls from US President Biden calling what’s happening “a genocide”. Reports confirm over 1000 Ukrainian soldiers have surrendered and the port has been captured. Both Eurozone and German economic sentiment indexes have printed negative reflecting the situation in particular Germany worsened the second drop since the war began and similar to the read around the beginning of covid 19 in March 2020. The long-term bull channel remains solid with price predicted to retest 0.7000 (1.4300) over the following couple of weeks.

Exchange Rates:
The current interbank midrate is: AUDEUR 0.6847 EURAUD 1.4604
The interbank range this week has been: AUDEUR 0.6808- 0.6903 EURAUD 1.4486- 1.4688

The English Pound (GBP) recovered off the recent low of 1.7170 (0.5825) to gain on the Australian Dollar (AUD) the second week running reaching 1.7600 (0.5680) early this morning. Risk off mood causing US equity prices to close lower led to the rebound as well as rising UK inflation. UK CPI printed at 7.0% for March increasing from February’s 6.2%, the highest it’s been since March 1992 due to massive rises in energy and fuel prices. The UK will look to continue with its rapid tightening cycle, those BoE members who were dovish the last hike may not be now. Looking ahead we have Aussie employment data which forecast the unemployment rate to go under 4.0% for the first time this century. On the chart Iron ore looks to push back above the 150.00 area taking the AUD along for the ride, look for a retest of the weekly open at 0.5725 (1.7470) over the coming days.

Exchange Rate:
The current interbank midrate is: AUDGBP 0.5683 GBPAUD 1.7596
The interbank range this week has been: AUDGBP 0.5678- 0.5747 GBPAUD 1.7398- 1.7610

The New Zealand Dollar (NZD) improved to 0.6370 (1.5700) midweek on poor risk sentiment against the Euro (EUR) before losing gains to 0.6240 (1.6020) Friday post RBNZ rate announcement. The New Zealand Central bank hiked their interest rate to 1.5% from 1.0% – analysts were split on a 0.25% or 0.50% rise. The 50-point move is the first half a percent rise since November 1999 aimed at bringing down an overheating inflation expected to grow to over 7.0% in this cycle. The war in Ukraine entered its 50th day of fighting- the Ukrainian president Zelenskiy saying unless their fighters receive more weapons the war will become an “endless bloodbath” .. the Ukrainian fighters have defended their country far longer than the Russian army had anticipated. Overnight German and Eurozone economic sentiment came in poor two months in a row with the read similar to conditions at the beginning of covid in March 2020. We expect the kiwi to kick back based on overbought EUR conditions heading through tonight’s ECB policy statement and rate release.

Exchange Rates:
The current interbank midrate is: NZDEUR 0.6247 EURNZD 1.6007
The interbank range this week has been: NZDEUR 0.6230- 0.6372 EURNZD 1.5693- 1.6049

It’s been a risk off week generally with the British Pound (GBP) extending late last week gains against the New Zealand Dollar (NZD) to 1.9315 (0.5180) this morning. The RBNZ hiked its interest rate from 1.0% to 1.5% using the only tool they have to try to bring down rising inflation. The 50-point move was the first time in 22 years aimed purely to rein in inflation expectations which is expected to grow to over 7.0%. Initially the kiwi spiked to 1.8860 post the release but was later sold off even in the wake of improvements in overnight equity reversals. The Pound got a further leg up when UK CPI rose overnight to 7.0% from 6.2% in February marking the highest it’s been since March 1992. Coming in above the 6.7% forecast mainly due to rising fuel and energy costs. With inflation overheating bigtime the UK runs the risk of stagflation. We think 0.5180 (1.9300) will hold into next week as the NZD recovers.

Exchange Rate:
The current interbank midrate is: NZDGBP 0.5184 GBPNZD 1.9290
The interbank range this week has been: NZDGBP 0.5176- 0.5305 GBPNZD 1.8848- 1.9319

The New Zealand Dollar (NZD) rose initially off the back of US weakness to just shy of 0.6900 levels into Wednesday buoyed also by buyer interest post the RBNZ announcement. The RBNZ raised their cash rate to 1.5% from 1.0% the first time we have seen a rise of 50 points since November 1999 signalling a hard view of the need to bring down rising inflation. CPI is predicted to peak to over 7% amid this tightening cycle, the central bank felt the need to go hard sooner rather than later. Inflation in the US hit a 40 year high of 8.5% midweek the highest it’s been since December 1981- this was slightly higher than forecasts at 8.4%. The main influencer being energy prices with Gas up 48% and energy 32%, food also jumping nearly 9%. The war in Ukraine produced a perfect storm of supply and demand woes and cementing expectations that the Federal Reserve will raise rates again by 50 points at their May meeting. We have key data out tonight with US Retail Sales before Fed member Mester speaks. On the chart, the bull channel in place since late January looks to have broken down this week signalling possible further downside for the kiwi.

Exchange Rates:
The current interbank midrate is: NZDUSD 0.6802
The interbank range this week has been: NZDUSD 0.6752- 0.6899