NZD/GBP Conversion:

The risk off tone continues to weigh down markets Monday with the British Pound (GBP) reaching 1.9555 (0.5115) against the New Zealand Dollar (NZD) as equity markets slipped further into the red. Thin markets with the UK bank holiday made for choppy conditions, the kiwi pulling back early week losses to 0.5145 (1.9440) early Tuesday. NZ Unemployment is forecast to click lower to 3.1% tomorrow when it publishes which could give the NZD a kick. Following this Thursday is the Bank of England (BoE) monetary policy and official cash rate. A rise  in the OCR is expected to take the rate to 1.0% in efforts to try and combat rising inflation but with the Ukraine war in focus the central bank may come out rather cautious. We expect further downside for the kiwi this week.

Current Level: 0.5161 (1.9376)
Resistance: 0.5230 (1.9650)
Support: 0.5090 (1.9130)
Last Weeks Range: 0.5129-0.5241 (1.9077-1.9494)

NZD to AUD Conversion:

The Australian Dollar (AUD) has climbed all over the New Zealand Dollar (NZD) in recent sessions, the pair returning to recent lows around 0.9120 (1.0960) extending last week’s strength from the 0.9240 (1.0820) high. A daily close above 1.1000 (0.9090) could spell further declines for the kiwi, the cross hasn’t traded above 1.1180 (0.8945) since September 2015, a possibility in the medium term but it has to get through 0.9000 first which could be a tall order. The RBA rate release and statement is later today, it’s not an absolute given the RBA will hike from 0.10%, it’s said this could mess with the Federal Election later this month with the RBA finding itself in the middle of a political and strategic dilemma. NZ jobs data prints Wednesday and is predicted to click lower to 3.1% the lowest in decades, this data may give the kiwi upside bias.

Current Level: 0.9115 (1.0959)
Resistance: 0.9240 (1.1040)
Support: 0.9060 (1.0820)
Last Weeks Range: 0.9110-0.9242 (1.0820-1.0976)

NZD/USD Conversion:

Massive support for the US Dollar (USD) of late has seen the New Zealand Dollar (NZD) sold down to 0.6412 in early morning trading, the lowest level since late June 2020. Risk flow hasn’t been kind to the kiwi in the wake of equity markets extending losses. Broad concerns over the war in Ukraine remain as UN backed “safe passage” has seen people evacuated from under the steel mill in Mariupol even though the Russians are still shelling the plant. Meanwhile Russia is making little progress in Dondas as meetings take place in Brussels to discuss further imports of Russian oil. The Federal Reserve meet this week to talk over policy with predictions they will raise the cash rate from 0.50% to 1.0% as Powell is set to go large on maintaining some sort of control over rising inflation. He may even hint as to how high interest rates will go as he manages overheating prices. Later in the week is the all-important US Non-farm Payroll release, this could rub salt into the NZD wound. On the chart we see little in the way of key support at 0.6250.

Current Level: 0.6458
Resistance: 0.6780
Support: 0.6250
Last Weeks Range: 0.6450-0.6644

Economic Releases Calendar

Tuesday 03/05
2:00AM, USD, ISM Manufacturing PMI
Forecast: 57.5
Previous: 57.1
4:30PM, AUD, Cash Rate
Forecast: 0.25%
Previous: 0.10%
4:30PM, AUD, RBA Rate Statement

Wednesday 04/05
10:45AM, NZD, Employment Change q/q
Forecast: 0.10%
Previous: 0.10%
10:45AM, NZD, Unemployment Rate
Forecast: 3.10%
Previous: 3.20% Read more

FX Update: Global Risks Remain

Market Overview

Key Points:

• Risks to global growth remain elevated
• Russian President Putin has warned of swift retaliation if the “West” intervenes in Ukraine/Russian war
• The USD appreciates for the fourth straight month against the Japanese Yen and Euro with interest rates the main driver
• The ECB left rates unchanged and plans to exit their massive stimulus plans in the coming months. Markets are now pricing in a 0.25% hike in the September-December meeting which would bring the deposit rate back to zero
• Bank of Canada’s Macklem0.6531 says the economy is overheating and creating inflationary pressures
• The Bank of Japan should keep policy the same today when they meet, risks are swayed to the topside around 130.00 in the JPY/USD if the Bank of Japan come out dovish
• The German economy is predicted to grow 2.2% in 2020 and 2.5% in 2023
• US House shows more evidence of slowdown with March figures releasing at 5.77m down 2.7% seasonally adjusted. The 30-year fixed rate loan rate has jumped recently from 3.3% at the start of 2022 to 5.2%. Cash rate increases are expected at the May, June, and July Fed meetings to peak at 3% in early 2023 before rate cuts kick off again by the end of the same year Read more

AUD/EUR Conversion:

Fallout from the Russian/Ukraine war continues to send the Euro (EUR) lower not only against the Australian Dollar (AUD) but against the main board of currency crosses. Equities slipped lower at the start of the week as “risk” conditions faded sending the cross to 0.6670 (1.5000) before recovering to 0.6745 (1.4830) this morning. US indices and commodity prices are recovering somewhat as we head into the NY daily close. The German Business Climate Index came in better than the 88.3 expected at 91.8 surprising punters however analysts warn of early optimism in a war. Australian CPI q/q rose 1.3% yesterday for Q1 following a 0.8% rise in the 2021 Q4. Year on year this takes it from 3.5% to 5.1% surpassing forecasts of 4.6%. To blame was surging transport costs, fuel prices and building costs. This inflation release officially puts the RBA “behind the curve” as inflation is now outside the RBA’s target band. This benign said we expect the RBA to hike rates at next week’s meeting from 0.10% to 0.25%. To us the likely scenario is a retest of 0.6825 (1.4650) developing over the coming days.

Current Level: 0.6744 (1.4830)
Resistance: 0.6870 (1.5200)
Support: 0.6580 (1.4550)
Last Weeks Range: 0.6705-0.6876 (1.4543-1.4915)

AUD/GBP Conversion:

The Australian Dollar (AUD) moved off the early 6 week low of 0.5595 (1.7880) against the British Pound (GBP) Monday well supported against a “risk” off backdrop recovering to 0.5710 (1.7520) Wednesday as equity markets posted gains. UK economic data of late hasn’t been flash with UK debt service and public sector wage costs blowing out and Bank of England’s Bailey on the wires less hawkish. Aussie CPI has again as predicted ballooned to 5.1% year on year from 3.5% rising 1.4% q/q ending March. This raises the question of when and how much the RBA could/should raise interest rates at next week’s meeting. As inflation is miles outside the target band now, we expect a hike of 0.15% to 0.25% with a possible monster rise in June if an economic perfect storm develops. Late next week we have the Bank of England (BoE) Monetary Policy Report and official cash rate with expectations of a hike to 1.0% from 0.75%. The BoE have previously said they would start selling bonds when the rate hits 1.0% but we think they will wait a while longer. On the chart – a retest of 0.5620 (1.7800) looks possible.

Current Level: 0.5677 (1.7614)
Resistance: 0.5800 (1.7900)
Support: 0.5585 (1.7250)
Last Weeks Range: 0.5630-0.5718 (1.7488-1.7757)

AUD/USD Conversion:

A strong US Dollar (USD) sent the Australian Dollar (AUD) packing off Monday’s open from 0.7250 falling to 0.7100 in early Wednesday sessions, suffering a double whammy of poor sentiment and yield differentials. The Aussie attempted to recover earlier setbacks bouncing higher to 0.7190 on improved risk and the hot inflation read but since drifted back to lows around 0.7120 this morning. Inflation came in at 5.1% year on year and 1.4% for Q1 as supply chain woes, energy, and housing costs balloon. This should signal the RBA to hike off 0.10% at next week’s meeting and probably again in June. US “advance” GDP prints tomorrow with expectations of growth in the first quarter 2022 predicted to be around 1.1% from the monster rise in December (4th Q) of 6.9% with slower inventory growth. Major support on the chart is 0.7000 the big figure, we are unsure if this will hold, certainly a drop below 0.6960 could signal further declines fending off the July 2020 low.

Current Level: 0.7113
Resistance: 0.7280
Support: 0.7100
Last Weeks Range: 0.7233-0.7455

NZD/EUR Conversion:

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)

NZD/GBP Conversion:

“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)