FX News

The New Zealand Dollar (NZD) is trying its best to move topside this morning against the Australian Dollar (AUD) pushing to 0.9460 (1.0570). The carry trade NZD buying evident in this recent move with the RBNZ predicted to hike interest rates tomorrow to 5.25% possibly 50 points to 5.75%, certainly most of the 25-point hike has been priced in. 0.9550 (1.0475) is the next target- the high of December 2022, through here and the pair could target December 2021 levels around 0.9710 (1.0300).

Current Level: 0.9457 (1.0566)
Resistance: 0.9550 (1.0740)
Support: 0.9310 (1.0470)
Last Weeks Range: 0.9291-0.9450 (1.0582-1.0762)

The New Zealand Dollar (NZD) has traded into Tuesday to the top of the 10-day range. The US Dollar (USD) underperformed on recent Fed speak. Equities have also helped the NZD together with solid local data of late. Chances are post the NZ budget spend up that we could see a 50-point hike to the RBNZ cash rate Wednesday to 5.75% instead of just 25 points. The US debt ceiling negotiations resume today with Biden asking Republicans to compromise above the current cap of around 31.4tn, failure to do this could result in the US defaulting on its debt obligations. Although a rise of 25 points tomorrow is mostly priced in, 50 points won’t be. A dovish Fed and a perky NZD could be captivating.

Current Level: 0.6300
Resistance: 0.6370
Support: 0.6180
Last Weeks Range: 0.6184-0.6304

Key Points:
• The G7 economic summit in Japan has come to a close. Meanwhile the Russian Foreign minister knocked the G7 for “indulging in their own greatness” and trying to disrupt the Russia and China agenda.
• US House speaker McCarthy says no debt limit has been agreed yet.
• US Consumer spending up 0.4% in April.
• The Peoples Bank of China left rates unchanged at 3.65% (1 year) and maintained the 5-year LPR at 4.30%
• ECB’s Cos says they still have a way to go before they ease policy.
• Fed’s Powell still believes they need to start cutting rates before year end.
• The Eurozone consumer confidence indicator improved slightly in May but remains well below the long-term average.
• The New Zealand Dollar (NZD) has easily been the best performer over the past week, while the Japanese Yen (JPY) has been the worst performer. Read more

Tuesday May 23
All Day CAD Bank Holiday
7:15pm EUR French Flash Manufacturing PMI
Forecast: 46.1
Previous: 45.6
7:15pm EUR French Flash Services PMI
Forecast: 54
Previous: 54.6
7:30pm EUR German Flash Manufacturing PMI
Forecast: 44.9
Previous: 44.5
7:30pm EUR German Flash Services PMI
Forecast: 55
Previous: 56
8:00pm EUR Flash Manufacturing PMI
Forecast: 45.9
Previous: 45.8
8:00pm EUR Flash Services PMI
Forecast: 55.4
Previous: 56.2
8:30pm GBP Flash Manufacturing PMI
Forecast: 47.9
Previous: 47.8
8:30pm GBP Flash Services PMI
Forecast: 55.5
Previous: 55.9 Read more

Key Points:

Nothing to see here for middle income NZ as Grant Robertson delivers his “Wellbeing” budget. Opposition parties have renamed it accordingly- ACT “the build back broke” budget, Nats, the “blowout” budget, Te Pati Maori “no thrills” instead of no frills. In what Robinson called tough economic times most of the cash went to low-income earners with young people with a massive chunk of the population left head scratching. With the election looming those who may have been on the fence may now take the jump away from Labour.
Mexico central bank leaves cash rate unchanged at 11.25%
Fed’s Bullard leans towards a June interest rate hike, but member Timiraos is suggesting it will be a close call.
US Existing home sales for April 4.28M vs 4.30M forecast.
Bank of England’s Bailey doesn’t expect the balance sheet to return to pre covid carnage.
ECB’s Guindos confirms they have at least one more rate hike to go in this tightening cycle but later this year it could be touch and go based on incoming data.
Fed’s GDP tracker rises to 2.90% from 2.60% in second quarter 2023.
Canada’s inflation y/y rose to 4.4% in April 2023 from 4.30% in March.
The New Zealand Dollar (NZD) has been the best performer in the month of May while the Euro (EUR) has been the worst performer.

The British Pound (GBP) sits around the weekly open at 0.5345 (1.8710) into Friday trading against the Australian Dollar (AUD) after reaching 0.5315 (1.8820) earlier in the week. The Pound held up reasonably well after Bank of England Bailey comments. The governor was out talking up stubborn inflation and the need to tighten policy. The long-term GBP rally is still intact, we predict the cross to push into low 1.80’s (0.5400) levels over the coming weeks. UK CPI Wednesday will be our focus.

The current interbank midrate is: AUDGBP 0.5342 GBPAUD 1.8719
The interbank range this week has been: AUDGBP 1.8644- 1.8817 GBPAUD 0.5314- 0.5363

Recent global sentiment has risen the Australian Dollar (AUD) of late along with the rally in equity markets. However, the US Dollar (USD) rose Wednesday after a solid read in Core Retail Sales leading the Fed to be more hawkish the cross declined to 0.6600 areas. Australian unemployment rose in April as the economy shed jobs, the unemployment rate forecast was 3.5% but came in at 3.7%. A total of 4,300 jobs were lost after a strong start to 2023 for employment growth. Recent concerns that the RBA would continue to hike interest rates would have eased, the central bank has raised rates 11 times since this time last year. The risk now for USD buyers is that we see the pair dip back to the monthly low support at 0.6580 also the bottom of the recent 11-week range.

The current interbank midrate is: AUDUSD 0.6634
The interbank range this week has been: AUDUSD 0.6603- 0.6708

The New Zealand Dollar (NZD) improved on early week levels to 0.5025 (1.9900) Friday against the British Pound (GBP) as equity markets posted gains improving “risk”. The NZ budget never really rocked the boat over the sessions with plenty of range trading. UK inflation has been downgraded as energy effects have dragged the number lower with utilities said to be a massive pull-on inflation through the second half of the year. The kiwi looks to retest resistance at 0.5050 (1.9800) possibly before the close. On the calendar we look ahead to next week’s RBNZ cash rate announcement.

The current interbank midrate is: NZDGBP 0.5027 GBPNZD 1.9892
The interbank range this week has been: NZDGBP 0.4963- 0.5030 GBPNZD 1.9877- 2.0147

The New Zealand Dollar (NZD) wasn’t able to hold 0.6260 levels midweek dropping back to 0.6200 against the US Dollar (USD) early Friday as the equity rally ran into selling pressures. Fed officials have indicated the next policy meeting rate decision will most likely be a close call with most members hinting they support further hikes. Lifting the rate another quarter percent seems to be the call come June 14th. NZ Producer prices come in light just prior to the NZ annual budget being read, the cross bouncing around over the announcement. Next week’s RBNZ policy meeting Wednesday could be interesting with the budget pushing up chances of further hikes by the central bank with the budget not doing much to ease inflationary pressures.

The current interbank midrate is: NZDUSD 0.6240
The interbank range this week has been: NZDUSD 0.6185- 0.6271

Late last week’s hawkish tone from the ECB seems to be losing its impact this week with the cross coming off the open at 0.6125 (1.6330) to 0.6165 (1.6220) in early trading Tuesday. The EU economy seems to be weathering the Ukraine war well with a diversification of gas supply and recent falls in prices. The economy continues to grow with GDP forecasts this year of a 1.1% gain in growth compared with 0.9% forecast back in February. Fears of a recession in the area are abating. Coming up we see Aussie employment data Thursday.

Current Level: 0.6165 (1.6220)
Resistance: 0.6200 (1.6800)
Support: 0.5950 (1.6120)
Last Weeks Range: 0.6117-0.6198 (1.6134-1.6346)