currency

A stronger greenback based on yield differentials has the New Zealand Dollar (NZD) underwater, weighed down by broad risk off flows and global sentiment. The kiwi clocked fresh lows over the week to 0.5855 areas with the Federal Reserve maintaining a dovish stance in a backdrop of recession speak. Fundamentally, we don’t expect the kiwi to hold ground for much longer before a much deeper move eventuates. Key standouts next week come in the form of US CPI y/y and Retail Sales. Anything north of 3.2% inflation could drag down the NZD.

The current interbank midrate is: NZDUSD 0.5882

The interbank range this week has been: NZDUSD 0.5857- 0.5960

The New Zealand Dollar (NZD), Australian Dollar (AUD) is still pivoting around 0.9210 (1.0860) as the cross closes another week of range bound action. The RBA kept rates on hold at 4.10% Tuesday, the third month running but reiterated they will keep options open for the possibility they may need to hike down the track if inflation and wages remain stubborn over the second part of the year. Certainly, next week’s Aussie employment data will give us more clues as to what we could expect. Also of note were comments from the RBA that China was entering a period of downturn which could transpire into less raw materials being required from Australian mining. This could rub off on exports/inflation and AUD ahead.

The current interbank midrate is: NZDAUD 0.9218     AUDNZD 1.0836

The interbank range this week has been: NZDAUD 0.9188- 0.9233    AUDNZD 1.0830- 1.0883

Market Overview:

• European inflation came in at 0.1% for the second quarter of 2023 revised lower than the initial 0.3% following a rise of 0.1% in the previous quarter.
• The Bank of Canada left rates unchanged overnight at 5.0%, the Bank of Canada is expected to hold through to year end.
• Poland’s central bank has cut interest rates from 6.75% to 6.0% vs 0.25% expected.
• Bank of England’s Bailey is tipping for reasonable falls to inflation as the labour market continues to ease.
• Chinese August trade data -8.8% y/y vs expected -9.2%as China industry struggles.
• Chinese “Purchasing Managers Index” PMI prints well down at 51.8 vs 53.6 forecast – 54.1 previous.
• Goldman Sachs is predicting rate cuts for the Federal Reserve starting second quarter 2024. However, the chances of a hike at the Sep 21 meeting are now at 50/50.
• The US Dollar (USD) has been the strongest currency this week with Australian Dollar (AUD) the worst performing currency.

Prices in the Euro (EUR), Australian Dollar (AUD) extended last week’s run Monday reaching 0.6005 (1.6650) a 5-week high, before reversing into morning trade to 0.5985 (1.6700). German Trade Balance was down 0.9% from June to July, lower than expected at 15.9B compared to 17.6B highlighting a struggling economy. Today’s RBA cash rate release should reflect no change to 4.10% as their tightening campaign to slow inflation looks to be working. Also of interest on the calendar is Australian GDP for the June quarter predicted to come in at 0.3% up from first quarters 0.2%. Downside moves in the pair could restore this week.

Current Level: 1.6716
Resistance: 1.7065
Support: 1.6665
Last Weeks Range: 1.6672 – 1.6878

The Australian Dollar (AUD) clocked a fresh 6 week high of 0.6007 (1.6645) against the Euro (EUR) but couldn’t hold here dropping back to 0.5980 (1.6715), clearly the cross is not ready to make a move above the key 0.6000 level just yet. Chances of the ECB raising rates this Thursday from the current 4.25% have eased to around 40% from mid August’s 60%. We see chances of a hike in the 4th quarter at 70% depending on how CPI prints. Expectations are for decent drops in both September and October. Direction this week in the cross will mostly come from the ECB.

Current Level: 0.5981
Resistance: 0.6110
Support: 0.5860
Last Weeks Range: 0.5919- 0.6006

The Australian Dollar (AUD) closed slightly up on the British Pound (GBP) for the week at the 0.5130 (1.9500) area compared to 0.5100 (1.9620) last week as market moving economic data was non-existent. US employment data was down on expectations Friday helping to boost the Aussie into the close, however apart from this we had very few shifts. The UK economy still has upward pressures on inflation – the highest in the G10, a September 21 hike is not a given at this stage, but chances are the Bank of England may rise from 5.25%. Looking at this week’s docket we have the RBA tomorrow with no change from 4.1% expected.

Current Level: 1.9561
Resistance: 2.0000
Support: 1.9420
Last Weeks Range: 1.9478 – 1.9651

The New Zealand Dollar (NZD) is a little weaker off Monday’s open against the Euro (EUR) dropping to 0.5500 (1.8180) this morning as risk sentiment erodes. German Trade Balance came in light overnight printing at 15.9B compared to 17.6B predicted showing the country’s economy continues to waiver. A very thin calendar of events this week could see the EUR gather pace on a fundamental level.

Current Level: 1.8185
Resistance: 1.8485
Support: 1.8050
Last Weeks Range: 1.8081 – 1.8376