GBP

It’s been a quiet start to the week in the New Zealand Dollar (NZD), US Dollar (USD) cross with markets tentative ahead of US CPI y/y data publishing tonight. Expectations are for a fall from 3.4% to 2.9% which ultimately may force the hand of the Fed to cut rates sooner. The recent shift from the RBNZ on rate cut forecasts will have an impact in today’s NZ Inflation Expectations release. We should get a drop in the 2-year, 5-year and 10-year forecasts which could impact on future cut predictions and the timing of another hike or two. Certainly, investors are positioning for this with the kiwi outperforming last week. Governor Orr speaks Friday- “Monetary Policy Remit and 2% Inflation” which could be interesting. Support at 0.6080 should also ensure the kiwi has a positive week.

Current Level: 0.6128
Support: 0.6080
Resistance: 0.6220
Last week’s range: 0.6037- 0.6157

US Non-Farm Payroll sent the New Zealand Dollar (NZD) reeling Friday, dropping from 0.6150 levels against the US Dollar (USD) to 0.6060 where the cross closed the week. Figures showed an improvement in jobs added in December of 216,000 with most industry sectors adding jobs, the print a lot better than the 173,000 expected. Early in the week the kiwi posted a new 2024 low of 0.6035 before recovering off NZ Job’s data into Friday. NZ unemployment clicked higher from 3.9% in the third quarter to 4.0% after a forecast of 4.3% was expected, confirming a slowdown in the NZ economy is playing out. This sparked a flurry of NZD buying, the kiwi pushing back to 0.6125. Next week’s economic docket is sizable with US CPI and NZ inflation expectations due. Traffic around 0.6000 looks safe for now.

The current interbank midrate is: NZDUSD 0.6093

The interbank range this week has been: NZDUSD 0.6037- 0.6123

NZ Waitangi Day holiday made for a slow start to the Australian Dollar (AUD), New Zealand Dollar (NZD) cross as it bounced around the 0.9330 (1.0720) zone. The Reserve Bank of Australia (RBA) released their cash rate Tuesday with no change from 4.35% widely anticipated. May’s early forecast for a rate cut in May could have been a tad optimistic with the central bank not ruling out 1 more hike based on stubbornly high inflation at 4.1%. The Aussie fell apart post the news dropping to 1.0640 (0.9400) where it sits early Friday at fresh yearly lows as investors exited the AUD. NZ Jobs data reflected a small rise to unemployment from 3.9% to 4.0% supporting the kiwi moves. We could see the cross push higher through 0.9400 (1.0640) into the close however 0.9425 (1.0610) should offer reasonable resistance.

The current interbank midrate is: NZDAUD 0.9384 AUDNZD 1.0648

The interbank range this week has been: NZDAUD 0.9310- 0.9402 AUDNZD 1.0635- 1.0741

The AUD remains soft, as has the EUR over the last week or so, trading around 0.6100, A slew of European inflation and growth data will almost certainly change this tight trading range. A recessionary Europe, with continued rising inflationary pressures, will force the ECB to hold rates higher, which will support the EURO$. If the reversal in recent upward inflation pressures ceases, then the growth narrative will take precedence and add pressure to the ECB to make rate cuts,
undermining the EURO.

Current Level: 1.6447
Resistance: 1.6103
Support: 1.666
Last Weeks Range: 1.6313 – 1.6529

The AUD remains soft, as has the EUR over the last week or so, trading around 0.6100, A slew of European inflation and growth data will almost certainly change this tight trading range. A recessionary Europe, with continued rising inflationary pressures, will force the ECB to hold rates higher, which will support the EURO$. If the reversal in recent upward inflation pressures ceases, then the growth narrative will take precedence and add pressure to the ECB to make rate cuts,
undermining the EURO.

Current Level: 0.6080
Resistance: 0.6210
Support: 0.6000
Last Weeks Range: 0.6050 – 0.6130

The GBP has been softer in the last week against the AUD, trading around 0.5200. This has been due to the weaker GBP, ahead of this week’s Bank of England meeting, to decide monetary policy settings. The Bank of England are expected to leave rates unchanged, but the question will be, will they recognise the recent reversal upwards in inflation? If so, and the BoE is force to hold interest rates higher for longer the GBP will rebound against the AUD Dollar. If the Bank of England see
inflation rises as negligible and temporary then downward pressure may remain.

Current Level: 1.9342
Resistance: 1.9607
Support: 1.9047
Last Weeks Range: 1.9212 – 1.9305

The ECB left rates unchanged and speculation is rife that interest rate cuts will begin in Q2, thus adding downward pressure to the Euro Dollar. This coming week is full of European GDP/growth and CPI/inflation across the European nations. If inflation resumes the downward direction of 2023 and growth continues to be recessionary (even contraction), then interest rates will be cut and the EUR will decline. The opposite is obviously true if GDP growth ticks upwards and inflation remains
resurgent.

Current Level: 1.7746
Resistance: 1.7857
Support: 1.7543
Last Weeks Range: 1.7550 – 1.7750