FX News

The New Zealand Dollar (NZD) made it through to 0.6800 last night the highest level since early February but was unable to hold here falling back against the US Dollar (USD) to 0.6300 this morning as equity prices closed lower. The odds of the Federal Reserve hiking their interest rate now is basically nil which has pushed up the greenback. US CPI for April showed 4.9% year on year pretty much creating a pause to rates a sure thing. This marks the lowest inflation since April 2021 printing below expectation of 5.0%. With forecasting of around 70 points of cuts to take place this year, this may be too much based on a cooling labour market. Also of consideration is the return of the Chinese market post Covid and the upturn of commodity prices which could send equity markets souring. This in turn means that interest rates would stay higher for longer. This would also support the greenback. Next week’s NZ annual “Wellbeing” Budget should move the kiwi.

The current interbank midrate is: NZDUSD 0.6295
The interbank range this week has been: NZDUSD 0.6288- 0.6383

The British Pound (GBP) has continued to lose ground over the week reaching 1.8590 (0.5380) before stabilising around 1.8650 (0.5360) prior to the Bank of England (BoE) rate decision. The Bank of England hiked their interest rate as predicted to 4.50%, the 12th consecutive time the central bank has raised going back to December 2021. It was a less dovish report from members who predict a better forecast ahead for the UK economy with the governor suggesting they are more confident of being able to get inflation back down to its 2.0% target. The bank suggested they may be nearing the end of their tightening cycle; we predict just one further hike before holding into 2024. This mostly depends on a tighter labour market and stronger business activity. A break below 0.5420 (1.8440) would suggest a reversal of the bear trend at play.

The current interbank midrate is: AUDGBP 0.5356 GBPAUD 1.8670
The interbank range this week has been: AUDGBP 0.5340- 0.5380 GBPAUD 1.8587- 1.8724

The New Zealand Dollar (NZD) has continued to track higher to 0.9400 (1.0640) style levels against the Australian Dollar (AUD) into Friday. It’s been met with heavy resistance at the 0.9430 (1.0600) area on the chart the high of December 2022. A nudge through here would set up an argument for a retest to 0.9540 (1.0480) carrying on the bull run from 0.9150 (1.0930). The technical indicators are supportive of such a move, especially if the Aussie is held back by softening metal prices and fragile Chinese data. Looking ahead we have Australian Dollar employment data next week.

The current interbank midrate is: NZDAUD 0.9394 AUDNZD 1.0637
The interbank range this week has been: NZDAUD 0.9313- 0.9432 AUDNZD 1.0602- 1.0737

Key Points:

US Dollar index falls on US CPI release.
NZ April Manufacturing PMI 49.1 vs 48.1 predicted.
Bank of England member Saunders has suggested that the April BoE inflation figure will undershoot the bank’s forecast by quite a chunk.
The Australian labour government released its annual budget showing a surplus, the first in 15 years as strong labour growth and mining profits surged. The surplus of AUD 4.2B to June 2023 the first since 2008 financial year and a switch up from the forecast of AUD 37B forecast last October.
Finance Minister Robertson says govt spending is now around 30% of GDP and that the govt fiscal position is strong.
US Federal Budget surplus 176B compared to 235B predicted.
ECB’s Lagarde says they have more to do in the fight against inflation with upside risks significant. ECB’s Nagel saying – we are not done yet with core inflation still too high.
ECB’s Guindos suggests inflation will fall and the eurozone should expect growth in the first and second quarters of 2023.
The New Zealand Dollar (NZD) has been the best performer this week while the Euro (EUR) has been the worst performing currency.

Market Overview

• Currencies recovered Monday against the greenback and stocks have been well supported.
• Markets are pricing a less aggressive Fed policy going forward.
• The ECB are planning sanctions against Chinese companies who are supporting the war in Ukraine.
• NAB Business confidence came in better than expected at 0 vs -1 suggesting April’s outlook was balanced.
• Crude oil settles at 73.00 after being down around 63.00 in early May.
• ECB’s Lane said there is still a lot of inflation momentum.
• Chinese exports rose in April but at a slower pace based on unfulfilled orders a by-product of last year’s covid disruptions.
• German Industrial Production is well down in March -3.4% compared to 2.0% previously and -1.3% expected. Poor automotive performances are mostly to blame.
• The New Zealand Dollar (NZD) has been the best performer this month while the US Dollar (USD) has been the worst performing. Read more

Risk mood improved Monday extending the Australian Dollar (AUD) through to a 6-week high against the Euro (EUR) to 0.6160 (1.6230) where it sits currently. Recent German factory orders came in poor following the Retail Sales disappointment. The Euro was also sold off post the ECB rate release unusually after Lagarde hiked their interest rate from 3.50% to 3.75%- Lagarde saying they are nearly there but hasn’t ruled out further hikes. Nuda to publish this week on the docket. We expect the cross to pivot around 0.6165 (1.6220) levels over the week.

Current Level: 0.6164 (1.6223)
Resistance: 0.6235 (1.6450)
Support: 0.6080 (1.6040)
Last Weeks Range: 0.6000-0.6131 (1.6310-1.6668)

The Australian Dollar (AUD) has extended gains off Monday’s open against the British Pound (GBP) clawing back last week’s losses to trade back around 0.5375 (1.8600) this morning. However, sentiment towards the Bank of England (BoE) outpacing other central banks and particularly the Bank of Australia with more hikes on the horizon over the following months including the outlook for a 60 point shift at Septembers meeting following a 25 point rise this Thursday from 4.25% to 4.50% could see the Pound reverse higher in a heartbeat. Could it be that this aggressive approach has markets in a spin with a lot of recent topside movement in the GBP unjustified?. UK GDP is predicted to come in at 0.0 later in the week. Setbacks in the GBP should be well supported for now.

Current Level: 0.5375 (1.8604)
Resistance: 0.5435 (1.9000)
Support: 0.5265 (1.8400)
Last Weeks Range: 0.5259-0.5375 (1.8604-1.9013)

Last week’s choppy action in the New Zealand Dollar (NZD), Australian Dollar (AUD) cross saw the pair close around 0.9340 (1.0710). Mondays’ action into Tuesday has seen the kiwi push higher to 0.9365 (1.0680) as the cross continues its mini-NZD Bull run from 0.9160 (1.0920) from the 20th of April. If trend is anything to go off we may see a retest of the yearly high at 0.9435 (1.0600) develop. The chart trendline and moving averages confirms further upside could be at play. The Australian budget releases at 9.30 NZT expected to be decent.

Current Level: 0.9350 (1.0682)
Resistance: 0.9435 (1.0980)
Support: 0.9110 (1.0600)
Last Weeks Range: 0.9232-0.9415 (1.0621-1.0832)

The New Zealand Dollar (NZD) is stronger this morning against the US Dollar (USD) trading around the 0.6350 area boosted by a bounce in equity markets and bond yields. We have seen a good push since the low of 0.6120 in late April but I’m not sure the kiwi has more in it with prices looking overbought and close to resistance levels around 0.6370. Fed’s Jerome Powell has said he is trying to pull a soft US economic landing out of the bag and avoid a recession. Is this possible? no-one knows but with an imminent credit crunch and recent bank failures this will take a toll on the US economy compared to the NZ economy which has a booming labour market which could repel a result nobody wants to see happen. Inflation in the US has been coming down fast of late but may struggle in the medium term to hit the required 2-3% band which could raise chances of a recession. A spurt through 0.6380 levels in this wee rally could be interesting with a possible retest of the yearly high at 0.6535 in sight.

Current Level: 0.6344
Resistance: 0.6500
Support: 0.6100
Last Weeks Range: 0.6160-0.6315

The New Zealand Dollar (NZD) continues its run higher against the British Pound (GBP) Monday extending from last week’s 0.4915 (2.0340) to 0.5030 (1.9877) this morning as the “risk on” mood supported the kiwi. Equity clocked further gains overnight the second day returning over 2% profits. News of the Fed getting close to considering no further hikes has had a “feel good” vibe however considering the long-term outlook by the Bank of England (BoE) to keep hiking this 10-day NZD rally could end suddenly. This week’s Bank of England Cash rate should see a hike of 25 points to 4.50% with the BoE signalling more to follow in the coming months. Resistance on the chart sits at 0.5040 (1.9850), a breakthrough here and we could see further upside.

Current Level: 0.5029 (1.9884)
Resistance: 0.5045 (2.000)
Support: 0.5000 (1.9820)
Last Weeks Range: 0.4913-0.5011 (1.9955-2.0353)