NZD/AUD Conversion:

The New Zealand Dollar (NZD) retraced higher moves in early week trading against the Australian Dollar (AUD) back to 0.9240 (1.0820) as kiwi outperformed. Australian Inflation has surged again from 3.5% to 5.1% year on year surpassing market estimates of 4.6% marking the highest read since the early 2000’s and adding more pressure for the RBA to hike and hike hard. Risk off conditions backed the AUD into Thursday with prices down at 0.9175 (1.0900). Prospects that the RBA will hike next week will make it tough for the kiwi to catch a break over the next few sessions, with inflation now well above the 2-3% band, the RBA will rapidly bring in a tightening phase starting with a rise of 0.15% next week and another one in June. Also on the economic docket next week is NZ employment figures expected to be bumper and may give the NZD a push.

Current Level: 0.9178 (1.0886)
Resistance: 0.9275 (1.1000)
Support: 0.9090 (1.0780)
Last Weeks Range: 0.9092-0.9195 (1.0875-1.0998)

NZD/USD Conversion:

The New Zealand Dollar (NZD) continues to sell off against a stronger US Dollar (USD) towards pivotal support at 0.6520. Broad concerns over the war in Ukraine and consensus that the Fed will raise rates to curb rising inflation have helped the big dollar of late. Although equity markets had a better session overnight regaining some of the earlier week losses the kiwi still struggled. US Consumer Confidence released slightly down at 107.3 from the 108.5 predicted as expectations of further inflation is on everyone’s minds. US Advanced GDP is expected to print around 1.1% for Q1 compared to 6.9% in the 4th Q which may give the kiwi scope for upside moves. Next week’s calendar is action packed with NZ employment data and US Non-farm payroll releasing. Also, we have the Federal Reserve rate and policy announcement which should give us more clues as to how the Fed will continue to tighten policy. A drop below 0.6500 (Sep 2020 level)  may indicate more downside in the cross.

Current Level: 0.6531
Resistance: 0.6700
Support: 0.6520
Last Weeks Range: 0.6625-0.6813

Economic Releases this Week:

Sunday 24/05
All Day, EUR, French Presidential Election

Monday 25/05
All Day, NZD, Bank Holiday
All Day, AUD, Bank Holiday
All Day, EUR, Italian Bank Holiday

Wednesday 27/05
12:30am, USD, Core Durable Goods Orders m/m
Forecast: 0.50%
Previous: -0.60%
12:30am, USD, Durable Goods Orders m/m
Forecast: 1.00%
Previous: -2.10%
2:00am, USD, CB Consumer Confidence
Forecast: 108.5
Previous: 107.2
1:30pm, AUD, CPI q/q
Forecast: 1.70%
Previous: 1.30%
1:30am, USD, Trimmed Mean CPI q/q
Forecast: 1.20%
Previous: 1.00%

Thursday 28/05
Tentative, JPY, BOJ Outlook Report
Tentative, JPY, Monetary Policy Report
Tentative, JPY, BOJ Press Conference

Friday 29/05
12:30am, USD, Advance GDP q/q
Forecast: 1.00%
Previous: 6.90%
12:30am, USD, Advance GDP Price Index q/q
Forecast: 7.30%
Previous: 7.10%
12:30am, USD, Unemployment Claims
Forecast: 178K
Previous: 184K
All Day, JPY, Bank Holiday

Saturday 30/05
12:30am, CAD, GDP m/m
Previous: 0.20%
12:30am, USD, Core PCE Price Index m/m
Forecast: 0.30%
Previous: 0.40%
2:00am, USD, Revised UoM Consumer Sentiment
Forecast: 65.8
Previous: 65.7

Key points for the week…

Key Points:

  • Chinese GDP rises 4.8% y/y but the short term economic prospects look to be less rosy as omicron severely affects their outlook 
  • The ECB left rates unchanged late last week 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 
  • Lagarde says the war between Ukraine and Russia is stoking risks to upside inflation expectations in the Eurozone
  • Canadian CPI m/m published at 1.4% in March raising the year on year rate to 6.7% the highest since January 1991 band coming in well above the anticipated 6.1% 
  • 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  
  • Russian troops have claimed victory as they take Mariupol, around 120,000 civilians remain stranded in the city
  • USA is providing an additional 800M worth of military aid to Ukraine, meanwhile China refuses to criticise Russia’s invasion of Ukraine

AUD To EUR Conversion:

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

AUD To USD Conversion:

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

NZD To EUR Conversion:

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

NZD To GBP Conversion:

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

NZD/USD Conversion:

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

NZD to AUD Conversion:

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