Wild shifts in currencies has seen the Australian Dollar (AUD), Euro (EUR) pair come off a weekly open of 0.6745 (1.4830) and travel to 0.6870 (1.4550) late yesterday. This marks a July 2017 high in the cross. Rallying commodity prices and solid local data supported the Aussie although risk sentiment in the market has been extremely negative. The Euro is under more pressure as the Russia-Ukraine crisis compromises growth forecasts in the Eurozone as the ECB is forced to hold fire on potential rate hikes although record inflation continues to rise. Rising gas prices look very much like we could see an energy shock recession. A reversal rally overnight took the cross back through the weekly open to 0.6715 (1.4890). The pair remains sensitive to isolated shifts in risk tone. Read more
AUD/GBP
The Australian Dollar (AUD) monstered the British Pound (GBP) off the open yesterday reaching a whopping 0.5640 (1.7730) a 12-month high as conflicts in the Russian war put considerable pressure on the Pound and the UK economy. A corrective move early this morning saw a reversal in the cross to 1.7900 as European leaders said they would hold out on Sanctions of Russian energy exports preferring an alternative strategy to reduce Russian imports which Russia is a major global exporter. Upwardly revised UK Manufacturing PMI hit a 7-month high may have contributed to cushioning the Pound somewhat. Iron Ore and commodities continue to skyrocket with Iron ore trading at 1.56 por tonne a 6-month high. Looking ahead we have a slow week of economic data with just RBA Governor Lowe speaking tomorrow. In the meantime, we should continue to see wild “risk” swings continue. Read more
AUD/USD:
The Australian Dollar (AUD) rose to a 4 November 2021 High yesterday against the US Dollar (USD) continuing its risk rally channel run from 0.6980 in late January to 0.7440. Commodity prices along with Gold, Silver and Crude all backed away from recent highs during overnight trading taking Aussie support with it. The AUD/USD cross trading back at 0.7315 early this morning. Friday’s Non-Farm Payroll release came in better than expected at 678k vs 407k predicted the biggest monthly gain since July 2021, assisting to push the pair higher. Unemployment also published lower at 3.8% in February compared to 4.0% in January. This result has boosted chances of a Fed move sooner than later with interest rates hike action. Geopolitical woes in the Russian/Ukraine war are creating extremely large moves in currencies and will continue to do so. Markets await results from third round negotiation talks and Russian energy sanctions. Support in the cross is at 0.7280.
Current Level: 0.7328
Resistance: 0.7430
Support: 0.7280
Last Weeks Range: 0.7163-0.7379
NZD/EUR:
Market volatility caused by uncertainty in the Russian/Ukraine crisis has caused the New Zealand Dollar (NZD) to clock 0.6395 (1.5640) late Monday against the Euro (EUR) in what turned out to be one of the biggest two day moves we have seen in years. From Friday’s open at 0.6110 (1.6370) it has been all NZD strength. Blink and you will miss it- as fast as the kiwi posted July 2017 levels it backtracked to 0.6270 (1.5950) as I write with risk sentiment turning deeply pessimistic, stocks down over 2%. A risk off tone could continue into tomorrow as the economic consequences in the Eurozone weigh heavy on further NZD rallies. The ECB refinance rate and statement is Friday with the ECB having some tough decisions to consider with tapering QE amid uncertainty. Read more
NZD/GBP:
The New Zealand Dollar (NZD) extended its recent run higher against the British Pound (GBP) in a big way Monday coming off a weekly close at 0.5180 (1.9300) levels to post 0.5255 (1.9035) late in the day. While risk sentiment has been terrible the Russian/Ukraine war has put significant downward pressure on the Pound, the kiwi reaching a 2022 high. Russian aggression may continue to benefit the kiwi for a while yet. Overnight prices reversed to 0.5200 (1.9220) as punters analysed the potential fallout of energy sanctions. Although the risk sensitive NZD has the potential to trade much lower, most of the action to date since the war began has been about the downside risks to Europe and UK trade impacts. Where to from here is anyone’s guess literally, but with surging inflation risks and supply chain woes worsening the RBNZ will carry on hiking which could underpin the kiwi over the following months. Read more
NZD/AUD:
The New Zealand Dollar (NZD) retreated to a June 2021 low of 0.9265 (1.0795) late Friday against the Australian Dollar (AUD) before moving back to 0.9345 (1.0700) in early Tuesday trading. Both currencies have been very well supported of late with commodities and risk products upside momentum- more so in the Aussie as the currency is more weighted commodity fluctuations. Recent trading within these late January ranges looks to continue. Governor Lowe speaks tomorrow at a financial summit tomorrow and could give further clues as to monetary policy tightening. Geopolitical tensions remain high in the Russian/Ukraine region and continue to affect the pair modestly, we expect a retest of 0.9370 (1.0670) as weakness in the Aussie develops. Read more
NZD/USD:
The risk correlated New Zealand Dollar (NZD) continues to be knocked around against the US Dollar (USD) as geopolitical tensions increase in the Ukraine/Russian war. The kiwi rose to 0.6920 late Monday tracking more than a cent higher off late Friday levels after a flurry of buying. What goes up must come down, the pair retracing towards 0.6820 as risk sentiment soured and commodities came off high’s and European leaders warned against banning energy imports from Russia. Risk flows should continue to weigh on NZD rallies over the week although with NZD economy inflation rises caused by supply chain problems could cause the RBNZ to continue with hikes at a rapid rate. The April 13 meeting is expected to report a 0.50% rise to 1.5% and could underpin the mighty kiwi for a while. One thing is for sure- it’s chaotic out there. Read more
FX Update: NZD Runs Hot
Key Points:
- Worldwide coronavirus cases surpass 447.653 million with over 6.025 million official deaths.
- New Zealand has 23,894 active community cases of coronavirus with 756 people in hospital, 16 in intensive care.
- Crude Oil prices soar to record levels after Iranian talks turn stale, Russian deputy PM saying crude prices could hit $300 per barrel if sanctions on Russian oil are brought in. US and EU allies are considering banning imports of Russian crude
- UK headlines report that the EU plans to pull back on Russian gas imports by two thirds over the next 12 months
- South Korea has suspended transactions with Russia
- US Equities give back last week’s gains falling over 2.0% overnight
- Ukraine/Russia conflicts cause gold to surge, topping out overnight at 2001.00 an ounce
- Any progress in the 3rd round talks between negotiators in the Ukraine and Russia war could take days or weeks to come up with a solution with 4th round talks due to start soon in Belarus
Economic Releases Calendar
Wednesday
11:15am, AUD, RBA Gov Lowe Speaks
Thursday
4am, USD, Jolts Job Openings
Forecast: 10.91M
Previous: 10.93M
4:30am, USD, Crude Oil Inventories
Previous -2.6M
7:01am, USD, 10-y Bond Auction
Previous 1.90|2.7 Read more
AUD/EUR
The Euro (EUR) is placed in a difficult spot, the currency is under a huge amount of pressure based on the Russia/Ukraine war compromising growth prospects and the EU is forced to put inflation risk on the back burner for now. The annual inflation in Euroland rose to a fresh high of 5.8% in February from 5.1% in January well above market projections of 5.4%. Expectations are for the ECB to defer any Asset Purchase Programme decisions until their April meeting given the geopolitical tensions. ECB interest rates should remain at or below current levels until inflation reaches its target band. Commodity prices should continue to support the AUD as investors sell the vulnerable EUR – for now.
Exchange Rates:
The current interbank midrate is: AUDEUR 0.6622 EURAUD 1.5101
The interbank range this week has been: AUDEUR 0.6417- 0.6633 EURAUD 1.5076- 1.5582