FX News

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

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