FX News

Monday May 29
All Day GBP Bank Holiday
All Day EUR French Bank Holiday
All Day EUR German Bank Holiday

Tuesday May 30
All Day USD Bank Holiday
7:00pm EUR Spanish Flash CPI y/y
Forecast: 3.50%
Previous: 4.10%

Wednesday May 31
2:00am USD CB Consumer Confidence
Forecast: 99.1
Previous: 101.3
11:00am AUD RBA Gov Lowe Speaks
1:30pm AUD CPI y/y
Forecast: 6.40%
Previous: 6.30%
1:30pm CNY Manufacturing PMI
Forecast: 49.5
Previous: 49.2
1:30pm CNY Non-Manufacturing PMI
Forecast: 54.9
Previous: 56.4
All Day EUR German Prelim CPI m/m
Forecast: 0.20%
Previous: 0.40%
8:00pm EUR ECB Financial Stability Review Read more

The Australian Dollar has retreated over the week to the 0.6500 level against the US Dollar (USD) from the weekly open at 0.6650. Easing metal prices and a struggling RMB have contributed to an underperforming Aussie, the pair now sitting at the lowest level since November 2022. Second estimate US GDP for the first quarter 2023 came in at 1.3% revised up from the first estimate, the slowdown attributed to the Fed’s tightening policy. Despite the threat of recession for the economy we expect the Fed to hike just one more time next month with markets pricing in chances at 70% for a hike at the June meeting. US Debt ceiling negotiations are still ongoing to try and raise the ceiling on the 31.4Tn to avoid a disastrous default as early as 1 June. We may see further downside momentum over the coming days.

The current interbank midrate is: AUDUSD 0.6498
The interbank range this week has been: AUDUSD 0.6495- 0.6667

The New Zealand Dollar (NZD) hasn’t been able to hold around the (0.5030) 1.9870 area massacred after the RBNZ release Wednesday. Price dipped sharply as the RBNZ hiked the cash rate 25 points. This was largely priced into the curve but with Governor Orr suggesting there would be no more tightening needed in this cycle and inflation is now under control the kiwi dropped over a cent to settle around 0.4920 (2.0320). Future rate moves in the UK will depend on developing inflation for the Bank of England. Inflation year on year came in at a hefty 8.7% Wednesday much higher than forecast raising forecasts for the central bank to keep hiking. The bank could end up hiking another 25 points in June then again in August and September. The bank said, “we expect inflation to exceed forecast modestly”. They will no doubt keep hiking in order to return inflation to its target band. The chance of a recession is now much more likely. It’s a light calendar next week for the cross, we may struggle to break past (0.4900) 2.0400 support.

The current interbank midrate is: NZDGBP 0.4914 GBPNZD 2.0350
The interbank range this week has been: NZDGBP 0.4902- 0.5065 GBPNZD 1.9744- 2.0396

The New Zealand Dollar (NZD) has been the weakest currency this week, falling to the 0.6050 level against the US Dollar (USD) into Friday over 2 cents since Mondays open. A 25-point hike by the Reserve Bank of New Zealand to 5.50% would usually be positive for the currency, but not on this occasion with most of the announcement already priced into the chart. Governor Orr’s comments suggesting higher rates are needed to combat inflation so that consumer inflation returns to its target range. It was noted that higher interest rates were having a negative impact on the economy and consumer wallets. It was also noted that annual budget spending and recovery funding for Cyclone Gabrielle could cost the economy over 14B and add to further inflation woes. US debt ceiling negotiations and a lack of a result pushed investors into the safe haven greenback adding to the kiwi slump. Fundamentally and technically the kiwi’s momentum is to the downside with support now at 0.6000 then 0.5550 the October 2022 low.

The current interbank midrate is: NZDUSD 0.6054
The interbank range this week has been: NZDUSD 0.6042- 0.6301

The Australian Dollar (AUD) has underperformed this week as weakness in the Chinese currency and precious metal prices have weighed down the currency. The British Pound (GBP) rallied post UK inflation data Wednesday, the cross clocking 0.5270 (1.8970) as inflation data published much higher than forecast coming in a massive 8.07% year on year. Future rate moves for the Bank of England will depend on developing inflation raising chances the bank will keep raising. The bank could end up hiking another 25 points in June then again in August and September. The BoE said, “we expect inflation to exceed forecast modestly”. They will have no choice but to keep tightening policy in order to return inflation to its target band. This raises the chances of the UK economy falling into a recession more likely and for longer. A break below 0.5250 (1.9050) and we are into early 2022 levels.

The current interbank midrate is: AUDGBP 0.5275 GBPAUD 1.8957
The interbank range this week has been: AUDGBP 0.5270- 0.5359 GBPAUD 1.8659- 1.8975

The Australian Dollar (AUD) recovered losses this week to trade back around the 3-week high of 1.075 (0.9300) against the New Zealand Dollar (NZD) despite the Aussie underperforming against other main currencies. The kiwi has by far been the poorest performer over the week contributing from a dovish RBNZ read. The RBNZ hiked interest rates to 5.50% from 5.25% Wednesday as predicted, however Governor Orr’s “shock” statement signalling he was done raising rates provided that incoming data shows inflation pressures are easing spooked markets. Looking ahead we have Lowe speaking midweek otherwise a thin calendar. We don’t expect the cross to travel much lower in the short term- perhaps a good time to sell AUD before the kiwi bounces.

The current interbank midrate is: NZDAUD 0.9312 AUDNZD 1.0733
The interbank range this week has been: NZDAUD 0.9298- 0.9471 AUDNZD 1.0558- 1.0755

Key Points:

US Debt ceiling negotiations continue. US House speaker McCarthy “we do not have a deal on debt ceiling”.
Another ship stuck in the Suez Canal has been re-floated.
Rating agency Fitch has placed Fannie Mae and Freddie Mac on “watch negative”.
New Zealand consumer confidence 79.2 vs 79.3 prior.
US jobless claims 229k vs 245k forecast.
ECB’s Villeroy- Interest rates should top out over the following 3 policy meetings.
Japanese Core CPI y/y 3.2% vs 3.4% forecast.
The New Zealand Dollar (NZD) has been the worst performer this week while the US Dollar (USD) has been the best performer.

The Australian Dollar (AUD) notched gains into Tuesday to 0.6650 after dropping early week to 0.6625 against the US Dollar (USD) broadly outperforming. The greenback giving back gains as the US congress debt- ceiling debate negotiations continue. We expect markets to price in additional “market risk” before a result is agreed which could be dovish for the Fed. Fed member Waller speaks on later this week which could bring further volatility. No Aussie economic data of note on the calendar this week, Fed minutes Thursday morning.

Current Level: 0.6659
Resistance: 0.6800
Support: 0.6600
Last Weeks Range: 0.6604-0.6708

The New Zealand Dollar (NZD) has made small gains Monday against the Euro (EUR) extending from last week’s 0.5705 (1.7530) reaching 0.5820 (1.7190) early Tuesday. The recent sell off in German Bonds and broad-based kiwi strength suggests we may see further upside on the horizon. The RBNZ cash rate and policy statement is tomorrow which could continue to price in further rises. The central bank is predicted to raise interest rates 25 points, possibly 50 to 5.75%. Certainly, advancing past the 100-day moving average at 0.5810 (1.7220) on the chart will get technical traders excited for more topside action.

Current Level: 0.5822 (1.7176)
Resistance: 0.5855 (1.7540)
Support: 0.5700 (1.7080)
Last Weeks Range: 0.5710-0.5825 (1.7171-1.7520)

The New Zealand Dollar (NZD) has extended its push higher against the British Pound (GBP) Monday. Being down around 0.4963 (2.0150) it has reached 0.5055 (1.9780) this morning. UK Inflation is due tomorrow with “services” inflation projected to be higher than forecast after seasonal adjustments. This could lower chances of the Bank of England increasing rates if core inflation comes in line or lower. At the moment, predictions are for the BoE to pause in June but hike again in August. Tomorrow we also have the RBNZ where the consensus is for the central bank to hike from 5.25% to 5.50%. This could give the NZD further momentum.

Current Level: 0.5061 (1.9758)
Resistance: 0.5085 (2.000)
Support: 0.5000 (1.9670)
Last Weeks Range: 0.4963-0.5058 (1.9770-2.0146)