FX News

Key Points:

New Zealand Dollar outperforms into Friday.
The US Federal Reserve lifted their interest rate Thursday from 5.0% to 5.25%, the Fed close to announcing a pause of their tightening policy.
US Stock Indices clock 3 day losing streak.
Bank of Canada’s Macklem: If we see inflation signs stuck above 2% they could hike again.
Chinese Caixin Manufacturing fell from 50.0 to 49.5 in April as selling cost pressures the worst in 7 years.
US Regional Banks are in the spotlight again following news PacWest Bancorp shares are down 46% overnight as the company considers “strategic alternatives”.
UK Mortgage Approvals rose in March representing the lowest level of net borrowings since June 2011
The ECB raises interest rates from 3.5% to 3.75%. Lagarde suggests the inflation outlook continues to be high and too long.
The New Zealand Dollar (NZD) has been the best performer this week while the US Dollar (USD) has been the weakest currency

Market Overview
– US authorities announced the take-over of the First Republic Bank by JP Morgan Chase. The deal includes credit line support and assistance for security losses, from the FDIC. This follows the collapse of UBS and SBV on respective sides of the Atlantic. It is the biggest bank failure since the GFC.

– The FOMC meeting this week will decide on whether the Fed will continue to raise rates. They have indicated this may be the last rate rise before they hit the ‘pause button’ to assess the impact of previous rate rises. The important PCE inflation indicator revealed continued and stubborn inflation in the US economy.

– The RBA will announce their latest interest rate decision today. They hit the pause button at the last monetary policy meeting and may continue this pause? Look for a more hawkish narrative, if they do resist the temptation, to resume rate rises.

– The ECB will also announce their latest policy on interest rate rises this week and they are expected to raise rates. German and European inflation levels are extremely high and imposing extreme economic hardships on the consumer.

– US Employment and the Labour market will come into focus during the coming week with a series of reports set to be released. The Jolts Job Reports, will be followed closely by the Challenger and ADP Private Sector Jobs report. The week will culminate in the all-important Non-Farm Payroll number and the US Unemployment number out Friday.

All eyes are on the RBA and if they elect to leave rates unchanged, once again, the downward pressure will resume on the AUD against both the EUR and the GBP. The ECB is expected to raise rates later in the week, thereby narrowing interest rate differentials and further adding to the woes of the AUD in the cross rate.

Current Level: 0.5305 (1.8850)
Resistance: 0.5370 (1.8620)
Support: 0.5255 (1.9030)

The RBA ‘pause’ on rate rises will come under the microscope today when the RBA announces their latest monetary policy statement. The expectations are for the pause to continue, but recent stubbornly high inflation numbers will add to the pressure on the RBA. Australian PMI data will also be watched closely, as will commodity prices, which have been under pressure due to recession fears. The FOMC and Non-Farm Payrolls will be the key data this week.

Current Level: 0.6635
Resistance: 0.6680
Support: 0.6580

UK inflation remains one of the highest in the Western world and compelled the Bank of England to continue to raise rates. The aggressive monetary policy has lent support to the currency allowing trade around 1.2500 in recent times. The cross rate remains down at around 0.4900. PMI data out during the week may influence the progress of the GBP, while local NZD support will be determined by other Central Bank decisions and US employment data, driving risk appetite. Watch the ECB rate rise and the impact on the ‘single currency’, to impact the NZD cross adversely.

Current Level: 0.4940 (2.0240)
Resistance: 0.5000 (2.000)
Support: 0.4900 (2.040)

The cross rate reached 0.9400, following the RBNZ surprise and hawkish 50 basis point rise in early April. The RBNZ was in direct contrast to the RBA, who hit the ‘pause button’ on rate rises at their last meeting. The RBA is meeting again today and expected to hold rates, although stubborn inflation would mean a resumption in rate rises, would not be a great surprise. The interest rate differential supports the NZD, but these can change quickly and the higher NZ rates also reflect risk. Recessionary fears have also driven commodity prices lower, as global commodity demand faulters.

Current Level: 0.9310 (1.0741)
Resistance: 0.9380 (1.0660)
Support: 0.9250 (1.0810)

The Banking crises continues to upset market stability and risk appetite. The US and European authorities have managed to contain the crises so far, but time will reveal all. The NZD has been sliding against the USD, since the initial boost from the RBNZ’s aggressive 50 basis point rate rise in early April. It has been all downhill since, despite the favourable interest rate differentials. Look for guides in the RBNZ Financial Stability Report to be released Wednesday 3rd May.

Current Level: 0.6175
Resistance: 0.6200
Support: 0.6125

Monday May 1
All Day CNY Bank Holiday
All Day GBP Bank Holiday
All Day EUR French Bank Holiday
All Day EUR German Bank Holiday
All Day EUR Italian Bank Holiday

Tuesday May 2
2:00am USD ISM Manufacturing PMI
Forecast: 46.8
Previous: 46.3
4:30pm AUD Cash Rate
Forecast: 3.60%
Previous: 3.60%
4:30pm AUD RBA Rate Statement
11:20pm AUD RBA Gov Lowe Speaks

Wednesday May 3
2:00am USD JOLTS Job Openings
Forecast: 9.74M
Previous: 9.93M
10:45am NZD Employment Change q/q
Forecast: 0.40%
Previous: 0.20%
10:45am NZD Unemployment Rate
Forecast: 3.50%
Previous: 3.40%
All Day JPY Bank Holiday Read more

Key Points:

Risk off currency flows continue into Thursday.
The US Consumer Confidence Index falls from 104 to 101 compared to consensus of 104 as economic expectations dropped.
New Zealand Credit Card spending eased from 25.5% y/y to 20.3% in the month of March.
Australian Inflation falls from 7.8% year on year to 7.0% in the first quarter of 2023.
US GDP first quarter is now forecast to come in at -1.1%
German consumer confidence improved from -29.3 to -25.7 on better income expectations in April.
Singapore has doubled the stamp duty on foreign buyers buying real estate to cool the market.
The ECB’s Herodotou has said the high ECB bank rates are beginning to impact the economy.
The Euro (EUR) has been the strongest performer this week with the Australian Dollar (AUD) underperforming and the weakest of the main board.

The heavy risk off mood this week in markets attributed by discouraging Fed comments and upward pressure to inflation expectations has seen the US Dollar (USD), Australian Dollar (AUD) cross slide to 0.6600 levels. Australian consumer confidence remains poor with no real recovery in sight from the looming recession. Confidence printed below 80.0 which was below the number for the entire period between 2020 to 2022 showing ongoing strains with inflation and monetary policy. Yesterday’s CPI Australian printed at 1.4% for the 1st quarter of 2023 up slightly from 1.3% in Dec 2022 but year on year down from 7.8% to 7.0% putting to bed any looming forecasting of further RBA rate hikes. The news sent to Aussie lower, mixed in with dips in metal pricing and a sharp selloff in the Chinese Yuan. Next week’s RBA cash rate, Fed cash rate and Non-Farm Payroll releases should give us plenty of scope for decent moves.

The current interbank midrate is: AUDUSD 0.6603
The interbank range this week has been: AUDUSD 0.6590- 0.6705