FX News

As we said last week, momentum in the Australian Dollar (AUD) continued off Monday’s open 1.0890 (0.9180) extending to 1.1020 (0.9075) Thursday, the highest level in the cross since February. The RBA surprised markets by hiking 25 points to 4.10% Tuesday rallying the Aussie as buyers dived in. With inflation stubbornly high the central bank is likely to raise rates again in July. Meanwhile Australian first quarter growth came in 0.2% lower than the 0.3% predicted as it continues to slow raising questions around the aggressiveness of the RBA policy. With the cross now well supported below 0.9100 (1.0990) the next area of support lies at 0.9000 (1.1100). Focus now is with next week’s first Q NZ GDP with expectations the economy could slip into recession after a -0.6% release in the last quarter of 2022. This will be unwelcome news for the NZD as the currency becomes less attractive. The saving grace could be high interest rates.

The current interbank midrate is: NZDAUD 0.9076 AUDNZD 1.1008
The interbank range this week has been: NZDAUD 0.9065- 0.9192 AUDNZD 1.0879- 1.1031

The Australian Dollar (AUD) continued to kick on from last week’s low at 0.5220 (1.9150) extending to 0.5385 (1.8570) against the British Pound (GBP) the by-product of a dovish RBA. In a surprise move the RBA hiked interest rates to 4.10% Tuesday its 12th rise in just over a year. Lowe saying with rising wages this could trigger further increases. The Australian economy grew at its slowest pace since 2021 in the first quarter of 2023 just 0.2% raising questions of the aggressiveness of the RBA. Price in the pair is back around 0.5350 (1.8700) areas into Thursday with a little GBP demand. The cross is still trading in a bear trend, a cross through 0.5400 (1.8520) could signal a reversal.

The current interbank midrate is: AUDGBP 0.5351 GBPAUD 1.8688
The interbank range this week has been: AUDGBP 0.5299- 0.5385 GBPAUD 1.8569- 1.8868

The Australian Dollar (AUD) was on the move Tuesday rising to 0.6715 against the US Dollar (USD) post the RBA rate announcement. In a surprise move the central bank raised rates to 4.10% from 3.85% after markets expected no change. Wage pressures and stubborn inflation are the main cause. The Fair Work Commission just announced a 5.75% wage increase in the minimum wage arguing that it wouldn’t add to inflation, but the stakes of further hikes increased. The RBA is likely to raise rates again at the July meeting. Meanwhile interestingly Australia’s economy grew by only 0.2% in the first quarter of 2023 raising questions of the RBA’s thinking. The overall slowdown in the economy will test their confidence that a recession will be avoided.

The current interbank midrate is: AUDUSD 0.6661
The interbank range this week has been: AUDUSD 0.6578- 0.6716

The New Zealand Dollar (NZD) came off the April 2020 low late last week at 0.4820 (2.0740) pushing back to 0.4900 (2.0400) resistance levels before giving back gains to 0.4860 (2.0580) into Thursday in volatile conditions. UK construction came in above expectation with the strongest rise in orders since April 2022, meanwhile the housing slump is the worst since May 2020. Recent GBP gains clearly reflect interest rate moves and expectations due to extremely high inflationary pressures. A UK recession fears however have the potential to overwhelm the Pound, especially in the later part of the year as data prints poor, stressing market sentiment. Clients selling GBP should consider anything at these levels.

The current interbank midrate is: NZDGBP 0.4860 GBPNZD 2.0576
The interbank range this week has been: NZDGBP 0.4850- 0.4904 GBPNZD 2.0389- 2.0615

The New Zealand Dollar (NZD) has been the worst performer over the week across the board but held its ground against the US Dollar (USD) coming off light losses from the weekly open at 0.6055 to 0.6040 this morning. Perhaps supported off the back of AUD gains post the RBA hike. However, the cross is still has a downward bias when we compare to the 0.6400 high in mid-May. It’s been a light week of data with just US Manufacturing printing at 50.3 vs 52.6 adding to US recession fears. With the RBNZ less hawkish of late and what’s expected to be a poor 1st quarter GDP print next week with chances the economy dropping into a recession, we could see further poor performances by the NZD late into the year

The current interbank midrate is: NZDUSD 0.6049
The interbank range this week has been: NZDUSD 0.6028- 0.6099

Monday June 5th
All Day NZD Bank Holiday

Tuesday June 6th
1:00am EUR ECB President Lagarde Speaks
2:00am USD ISM Services PMI
Forecast: 52.6
Previous: 51.9
4:30pm AUD Cash Rate
Forecast: 3.85%
Previous: 3.85%
4:30pm AUD RBA Rate Statement

Wednesday June 7th
2:00am CAD Ivey PMI
Forecast: 57.2
Previous: 56.8
11:20am AUD RBA Gov Lowe Speaks
1:30pm AUD GDP q/q
Forecast: 0.30%
Previous: 0.50% Read more

The British Pound (GBP) broke into new territory midweek against the Australian Dollar (AUD) slipping past the key level at 1.9040 (0.5250) on its way to reach 1.9180 (0.5215) the January 2022 level. Of note the Pound has outperformed the Aussie 4 months straight ending May. A solid break through 1.9220 (0.5200) could signal further momentum for the GBP. Central bank divergence should continue into the end of the year with the Bank of England predicted to hike interest rates again in June, August and September. Next week’s RBA release should see a “no change” from the 3.85% more than likely putting the AUD underweight.

The current interbank midrate is: AUDGBP 0.5250 GBPAUD 1.9047
The interbank range this week has been: AUDGBP 0.5213- 0.5303 GBPAUD 1.8855- 1.9182

USD weakness over the past day or so has seen the Australian Dollar (AUD) push up from its recent low of 0.6460 back to 0.6580 into Friday trading. Buyers of the greenback should be considering these levels to buy as the Australian Dollar (AUD) gathers considerable pace on the downside. However, for now the Aussie is holding up with a turn of market risks sentiment and positive data publishing in the form of Construction and Housing. Fed officials have indicated they will most likely hold interest rates steady at the June meeting before raising them again last in the year. This gives officials time to study the effects on the economy from the past 10 consecutive hikes. We expect the bearish continuation in the cross to continue, a break about 0.6600 looks unlikely.

The current interbank midrate is: AUDUSD 0.6375
The interbank range this week has been: AUDUSD 0.6457- 0.6583

The lack of economic data over the week has seen the English Pound (GBP) extend its rally against the New Zealand Dollar (NZD) to 2.0730 (0.4825) this morning. Monetary policy differentials are influencing kiwi moves of late when we consider the Bank of England eyeing up to hike rates again over the coming months. We said this would strengthen the GBP further which is what has unfolded over the week. The docket is thin again next week, central bank action should continue to be the main driver.

The current interbank midrate is: NZDGBP 0.4836 GBPNZD 2.0678
The interbank range this week has been: NZDGBP 0.4822- 0.4914 GBPNZD 2.0347- 2.0737

Risk markets improved overnight taking the New Zealand Dollar (NZD) off recent lows around 0.5980 to 0.6070 early Friday. US Equities put in a solid performance in overnight trading, the Nasdaq up over 1.2% as the greenback was sold off. The recent shift in the RBNZ policy continues to weigh on the kiwi fundamentals. We suspect we could see another improvement in the Non-Farm Payroll release tomorrow morning. US Manufacturing has indicated the industry is hiring new people with employment growth improving. Also, this week’s Services report showed job creations are the strongest it’s been in 10 months. ADP Non-Farm release was also positive overnight 278k vs 173k offering a clue as to what we can expect. Usually, a better-than-expected NFP release is good for the USD.

The current interbank midrate is: NZDUSD 0.6058
The interbank range this week has been: NZDUSD 0.5983- 0.6076