The GBP had suffered a fairly substantial correction downwards, but has staged a small recovery, over the last week or so. Inflationary pressures remain strong in the UK, boosting the likelihood of further interest rate rises, from the Bank of England. This will lend further support for the GBP, over the short term, and downward pressure on the cross-rate.
Current Level: .4709
Support: .4650
Resistance: .4750
Last week’s range:.4685 – .4720
The NZD/AUD cross rate remains fairly stable around 0.9200. Volatility in the NZD has been reflected on the opposite side of the Tasman, reducing any break-out fluctuations. All eyes will be focused on this coming weeks RBA, interest rate decision. They are expected to hold rates unchanged, but the associated commentary will be closely watched. Warnings of hotter inflation, will spook markets, especially considering the discount with which the environment Australian interest rates are operating in.
Current Level: .9202
Support: .9120
Resistance: .9225
Last week’s range:.9150 – .9210
The NZD/USD has been subject to the machinations of the reserve currency, the US Dollar. The Jackson Hole Symposium, closing out last week, shed no new light on monetary policy. Fed Chairman Powell continued to warn of high inflation and further possible interest rate rises. Par for the course. PCE readings of inflation this week, confirmed it remained stubbornly high, increasing the risk of further rate rises. The NZD has plunged all the way back to 0.5900 and looks likely to remain under pressure, while the USD is supported by rising interest rates.
Current Level: .5962
Support: .5900
Resistance: .5990
Last week’s range: .5900 – .5980
Market Overview
Key Points:
• Bank of America is forecasting 75 points of rate cuts in 2024, the first around June.
• US authorities are becoming increasingly sure that Wagner boss Prigozhin has died in the recent plane crash.
• Former US president Donald Trump’s trial for election interference has been set for 4th March 2024
• China has ditched the last of their travel restrictions with travellers not having to take a test 48 hours prior to entry into the country.
• The US Dollar (USD) has been the strongest currency over the month of August with the New Zealand Dollar (NZD) underperforming, the worst performer.
Major Announcements last week:
• US Home Sales q/q -1.0% vs -1.6% previous
• UK Manufacturing drops to 6 month low
• UoM Consumer Sentiment 69.5 vs 71.2
• French Manufacturing 46.4 in July vs 42.8 predicted
As we said earlier the Australian Dollar (AUD) came under pressure, but it wasn’t until late Wednesday we saw a shift off 0.9210 (1.0860) levels back to 0.9235 (1.0830). NZ Retail Sales disappointed in the June quarter coming in at -1.0% vs -0.4% the 3rd consecutive decline representing consumers leaving money in their pocket, the biggest contributor being food and beverage with the sector struggling. On the whole, the pair remains well within recent ranges. Next week’s economic docket looks super thin, more of the same looks to be the likely theme.
The current interbank midrate is: NZDAUD 0.9225 AUDNZD 1.0833
The interbank range this week has been: NZDAUD 0.9192- 0.9266 AUDNZD 1.0792- 1.0879
Detrimental news out of China this week pulled back risk currencies of recent moves, the Australian Dollar (AUD) no exception coming off 0.5200 (1.9230) levels to make 0.5175 (1.9330) early Friday. To be fair on the Pound, UK manufacturing wasn’t exactly a bumper read helping the pull back in the GBP. Recent rate hikes doing the job of sparking a renewed downturn in business activity, the question remains – is it enough to deter the Bank of England (BoE) from raising rates again.?. Buying GBP may want to consider.
The current interbank midrate is: AUDGBP 0.5092 GBPAUD 1.9638
The interbank range this week has been: AUDGBP 0.5018- 0.5101 GBPAUD 1.9603- 1.9925
After 5 weeks of downside moves in the Australian Dollar (AUD), US Dollar (USD) the cross took a breather trading just above the weekly open of 0.6402 at 0.6414 as I write. At one point trading up at 0.6485 post a positive day in equities and recovering metal prices. US manufacturing has been a talking point over the past couple of days amid a lack of other data, the index releasing at 47.0 in August compared to 49 in July the 4th consecutive month. The US economy looks to be nearing the crossroads with stagnation a real prospect with worsening spending increasing fears of pending recession. It would take a decent fundamental shift to move the cross off its downside axis, we pick further lower over the coming days/weeks.
The current interbank midrate is: AUDUSD 0.6415
The interbank range this week has been: AUDUSD 0.6387- 0.6488
The New Zealand Dollar (NZD) has mostly hovered around 0.5920 over the week against the US Dollar (USD) with a short trip to 0.5980 Thursday as equities recovered. Overall, the cross looks very bearish as its peers over the precipice. NZ Retail Sales missed forecast at -1.0% vs -0.4% expected the third time in a row, supporting the pull back in consumer spending of late. US New Home sales, weekly unemployment both helped the greenback, however with upcoming talks from Fed chair Powell at the Jackson Hole Symposium on future rate predictions, we could see the Fed head in a different direction quick.
The current interbank midrate is: NZDUSD 0.5917
The interbank range this week has been: NZDUSD 0.5896- 0.5985
The New Zealand Dollar (NZD) broke out of its recent bear channel this week recovering losses to 0.4700 (2.1280) into Friday sessions against the British Pound (GBP). We are not convinced this flurry will continue with fundamentals stacked in favour of further Pound moves. NZ Retail Sales printed down on expectations at -1.0% in the June quarter compared to -0.4% expected. This is the third straight quarter of poor data reflecting lower consumer spending. UK manufacturing also came in lower, confirming a renewed downturn in business activity. Next week’s thin calendar could see the kiwi slip.
The current interbank midrate is: NZDGBP 0.4699 GBPNZD 2.1281
The interbank range this week has been: NZDGBP 0.4632- 0.4797 GBPNZD 2.0846- 2.1588
Market Overview
Key Points:
• The New Zealand Dollar and Australian Dollar have both kicked off the week wobbly based on last week’s bearish pressures.
• The New Zealand Trade deficit widened from 0.11B to 1.11B in July as imports dropped 16% and exports fell 14%
• German producer prices fell 1.1% m/m for July vs 0.1% expected.
• US Treasury yields rise again, the 10-year bond rising to a 2007 high.
• Latest signs are that the Bank of Canada (BoC) will remain on hold at the September meeting.
• Chinese growth forecast for 2023 shifts from 5.2% to 4.8%, meanwhile the People’s Bank of China (PBOC) cuts their prime 1-year rate to 3.45% from 3.55% – no cut to the 5 year came as a surprise.
• The British Pound (GBP) has been the strongest currency this week with the Australian Dollar (AUD) the worst performer.
Major Announcements last week:
• Chinese Retail Sales y/y 2.5% vs 4.2% expected
• US Retail Sales for July 0.7% vs 0.4%
• RBNZ retain cash rate at 5.5%
• UK CPI y/y 6.8% vs 6.7% predicted
• Australia unemployment rate 3.7% up from 3.6%