AUD/GBP Conversion:

The volatility in markets rages on with war and inflation uncertainty causing problems everywhere. The Australian Dollar (AUD) has reversed last week’s gains from the weekly close at 0.5755 (1.7380) slumping to 0.5635 (1.7750) into Tuesday as soft risk sentiment drags down risk assets. US bond prices clicked higher as serious worry around the recent US Fed hike has market analysts concerned of potential negative impact to US and global economies. The recent poor US Production read has added to the bearish mood. Key data this week is prelim UK GDP q/q amid a thin docket. The 7-week low at 0.5600 (1.7880) could be challenged this week.

Current Level: 0.5610 (1.7825)
Resistance: 0.5850 (1.7880)
Support: 0.5590 (1.7100)
Last Weeks Range: 0.5600-0.5820 (1.7178-1.7854)

AUD/USD Conversion:

The Australian Dollar (AUD) has extended declines from last week’s 0.7260 high dropping against the US Dollar (USD) to 0.6950 this morning from the weekly open of 0.7080. It’s the first time since January this year the cross has gone below 0.7000 the physiological level as it clocks a new June 2020 low. Equity indices travelled lower overnight as well as a basket of main commodities including iron ore has come off 5% since last Thursday adding to the AUD woes. Market participants are spooked by the prospects of higher inflation in the US and short-term interest rates as they try to reign this in inflation and reducing its bond holdings – a move which could lead to slower long-term growth and earnings and raising fears of a possible recession. Key data this week in the cross is CPI m/m in the US. Buyers of USD should consider at these levels with a heavy bias to the downside remaining.

Current Level: 0.6916
Resistance: 0.7000
Support: 0.6750
Last Weeks Range: 0.7030-0.7262

NZD/EUR Conversion:

The global risk off theme sank the New Zealand Dollar (NZD) in overnight trading, in fact it was immediately on the backfoot post the weekly open travelling from 0.6080 (1.6450) levels to 0.6000 (1.6690) at the time of writing. Pivotal and physiological 0.6000 may hold for now but I wouldn’t put money on a reversal in the short term with the momentum building for further NZD declines. Equity markets remain under selling pressures as global inflation and supply issues weigh heavy. NZ inflation expectations q/q is the calendar highlight this week; we should get a better picture of where inflation could go over the coming years.

Current Level: 0.5956 (1.6790)
Resistance: 0.6040 (1.6830)
Support: 0.5940 (1.6550)
Last Weeks Range: 0.6065-0.6180 (1.6181-1.6488)

NZD/GBP Conversion:

Market rot set in quickly off Monday’s open, risk conditions slumped, and equities are down large. The British Pound (GBP) regained last week’s losses shifting from the 0.5210 (1.9200) areas to 0.5130 (1.9490) into early Tuesday. Looking ahead we have NZ inflation expectations and UK prelim GDP q/q. A retest of last week’s low at 0.5115 (1.9550) the 4 March low looks a given as the bearish run continues.

Current Level: 0.5099 (1.9620)
Resistance: 0.5190 (1.9680)
Support: 0.5160 (1.9280)
Last Weeks Range: 0.5114-0.5253 (1.9035-1.9551)

NZD/AUD (AUD/NZD) Conversion:

Late last week’s New Zealand Dollar (NZD) recovery continued into Monday markets against the Australian Dollar (AUD) with price reaching 0.9125 (1.0960) early this morning. The AUD has fought back into midday to around 0.9085 (1.1007) as the cross continues to hold above key support at 0.9000 (1.1110). The long-range Aussie bear channel trend from 0.9435 (1.0600) remains with a break above 0.9180 (1.0900) needed to signal a possible break higher. If commodities and risk assets deteriorate further such as ore and gas investors may become increasingly pessimistic around global growth prospects, this may be NZD supportive.

Current Level: 0.9080 (1.1006)
Resistance: 0.9130 (1.1090)
Support: 0.9020 (1.0950)
Last Weeks Range: 0.9000-0.9171 (1.0903-1.1110)

NZD to USD Conversion:

Sellers of the US Dollar (USD) are loving the recent drop in the New Zealand Dollar (NZD) as it retreats to a fresh low of 0.6315 as I write. This marks 7 weeks of underperformance as global risks filter to the surface in a big way. The Federal Reserve hiked rates last week as they try to reign in massive inflation, they will hike again in the June meeting which will slow growth prospects and slow the economy. We express concerns over “risk” assets such as the NZD as further Fed hikes will have a serious impact on world economies bringing about recessions. Amid concerns, were higher April inflation expectations with polls suggesting a rise to 3.9% in 3 years from 3.7% in the March survey. Meanwhile US consumers are worried about rising house affordability and rising lending rates as sentiment towards housing hits a 2 year low with most believing it’s a troubled time to buy a house. Key data this week is in the form of NZ Inflation expectations Thursday. We think the kiwi has more downside bias over the remainder of the week.

Current Level: 0.6290
Resistance: 0.6530
Support: 0.6200
Last Weeks Range: 0.6390-0.6565

This Weeks Calendar of Economic Releases

Tuesday 10/05
1:00AM, GBP, MPC Member Saunders Speaks

Wednesday 11/05
5:00AM, USD, FOMC Member Waller Speaks
7:00AM, USD, FOMC Member Mester Speaks
8:00PM, EUR, ECB President Lagarde Speaks
All Day, All, OPEC Meetings

Thursday 12/05
12:30AM, USD, CPI m/m
Forecast: 0.20%
Previous: 1.20%
12:30AM, USD, Core CPI m/m
Forecast: 0.40%
Previous: 0.30%
3:00PM, NZD, Inflation Expectations q/q
Previous: 3.27%
6:00PM, GBP, Prelim GDP q/q
Forecast: 1.00%
Previous: 1.30% Read more

Key Market News This Week:

Key Points:

  • Ukraine sinks Russian cruiser Moskva in the Black sea
  • Bank of England raises rate by 25 points to 1.0% as expected but warns of stagflation ahead
  • Chile’s central bank raises cash rate by 125 points from 7.0% to 8.25%
  • Nasdaq, DOW and the S&P start May trading positive but are down over 3.0% on the day   
  • Vice chair of the Federal Reserve Clarida suggests the Fed will need to raise rates to at least 3.5% to bring down inflation back to around 2.0%
  • Nasdaq trades to a new 2022 low declining over 5%
  • The ECB will probably raise rates and start a tightening cycle in June
  • The Australian Dollar (AUD) is the strongest currency this week with the British Pound (GBP) the weakest

AUD/EUR Conversion

The Australian Dollar (AUD) traded back to 0.6850 (1.4600) post the RBA statement and rate release boosted by a surprise extra hike. The central bank hiked their interest rate from the long term 0.10% to 0.35% slightly more than the 15 points markets were predicting, helping to rally the AUD. Given only a couple of months back the RBA were adamant they were not moving rates until well into 2023 this confirmed a real mood shift in the first hike in the new tightening cycle. The RBA will start backing off bond buying and updated their inflation forecast from 5.1% to 6.0%. Governor Lowe said growth for 2022 was expected to be around 4.25% and will drop to 2.0% in 2023 with households and businesses in good shape- for now. The ECB have been talking of a possible rate hike on the horizon which should support the EUR in the near to medium term. Risk sentiment took a dive overnight with the US indices all down over 4% taking the AUD/EUR to 0.6750 (1.4820).

Exchange Rates:
The current interbank midrate is: AUDEUR 0.6750 EURAUD 1.4814
The interbank range this week has been: AUDEUR 0.6682- 0.6850 EURAUD 1.4598- 1.4965

AUD/GBP Conversion:

A large move in the Australian Dollar (AUD), English Pound (GBP) cross over the week has seen price shift from 0.5610 (1.7820) to 0.5825 (1.7170) late Thursday as risk conditions improved and the RBA came out hawkish . The Bank of England raised interest rates to 1.0% overnight from 0.75% the highest level since 2009 and the fourth in as many policy meetings. The bank signalled they would move cautiously in the coming months warning of a possible recession based on an inflation ballooning out of control with predictions it could peak at 10%. Questions are being asked if the BoE should be more aggressive with hikes and “frontload” larger clips? The GBP got a push post the BoE statement reversing flow to 0.5740 (1.7420) early morning. Earlier in the week the RBA raised their cash rate to 0.35% from 0.10% in a surprise shift of 25 points and not the 15 punters were expecting. The central bank trying to stay ahead of the curve and halt rising inflation. Medium term bias could be AUD supportive.

Exchange Rates:
The current interbank midrate is: AUDGBP 0.5754 GBPAUD 1.7379
The interbank range this week has been: AUDGBP 0.5600- 0.5821 GBPAUD 1.7179- 1.7855