JPY

The recovery in the NZD/AUD cross rate has surprised many, considering the positions of the respective Central Banks. The RBNZ has already began to cut interest rates, with more to come, while the RBA has promised to keep rates at elevated levels, to combat stubborn inflation. This should widen interest rate differentials, pushing the cross lower, but the strong NZ economic data has defied logic. The cross reached 0.9250, but has slipped back to trade towards 0.9150, which is more in line with expectations.

Current Level: 0.9165
Resistance: 0.9300
Support: 0.9100
Last Weeks Range: 0.9160 – 0.9263

The NZD has continued to recover from the lows post-RBNZ rate cuts. Last week the KIWI approached 0.6300, supported by stronger than expected local economic data, including a robust Business Confidence number. This coming week will be dominated by US labour market reports, culminating in the Friday’s Non-Farm Payroll number. The weaker US labour market will only encourage the Fed to begin rate cuts, weakening the reserve. The NZD has slipped back towards 0.6200.

Current Level: 0.6220
Support: 0.6100
Resistance: 0.6300
Last week’s range: 0.6190- 0.6290

The NZD continues to recover, from lows, post-RBNZ rate cut decision. The lows of 0.5880 at the end of July was triggered by the RBNZ dovish commentary and then the rate cut. Since then, the KIWI has had a steady recovery, supported by a surge in global economic confidence and Global Central Bank rate cuts. The interest rate differential remains the same, while positive economic data is increasing risk sentiment. This week has seen a surge in NZ Business Confidence, while next week, markets will focus on NZ Trade and the US labour markets. The NZD has regained ground, to trade 0.6250, with some limited upside, if the global economic scene continues to improve.

The current interbank midrate is:              NZDUSD .6270

The interbank range this week has been:    NZDUSD .6200-.6250

The AUD cross rate sunk below 0.9000, following the RBNZ rate cut and affirmations that the RBA would continue to hold interest rates at elevated levels, as inflation remains stubbornly high in the Australian economy. Interest rate differentials favour the AUD, but the NZD has continued to recover from lows, rising back towards 0.9200. This price action can be afforded to the positive economic data coming from NZ and risk sentiment. The numbers point to downside on the cross-rate, back towards 0.9000.

The current interbank midrate is:              NZDAUD .9225  AUDNZD 1.0830

The interbank range this week has been:    NZDAUD .9150 – .9250            AUDNZD 1.0800 – 1.0950

The EUR has a similar experience to the NZD, following rate cuts from the ECB and the RBNZ. Initial downside, has been replaced by rebuilding in the EUR, as economic confidence returns, with the promise of growth from lower interest rates. The interest rate differentials will probably follow each other, remaining static, which is probably where the cross rate will be.

The current interbank midrate is:              NZDEUR .5650  EURNZD 1.7699

The interbank range this week has been:    NZDEUR .5500 – .5650            EURNZD 1.7699 – 1.8181

The surprising buoyancy of the EUR, following rate cuts from the ECB, has worked to bring the cross rate back toward 0.6100. The ECB has space to continue rate cuts, while the RBA has indicated a penchant, for at least holding rates, at these elevated levels. This should support favourable conditions for the AUD, in terms of the cross-rate, with the EUR.

The current interbank midrate is: AUDEUR .6130 EURAUD 1.6313

The interbank range this week has been: AUDEUR .6050-.6130 EURAUD 1.6313 – 1.6528

The GBP has also shared the experience of the EUR and the NZD, following interest rate cuts, from the Bank of England. The cross rate has been relatively stable and this is likely to continue, if respective Central Banks follow the rate cutting cycle. Positive economic conditions appear to be returning to the ‘Old Country’, but significant challenges remain. There are emerging political risks, domestically and internationally, while the upcoming budget may have a negative impact. The Labour Government is facing difficult choices and possible tax rises, as an option, will not be well received.

The current interbank midrate is: NZDGBP .4760 GBPNZD 2.1008

The interbank range this week has been: NZDGBP .4700 – .4770 GBPNZD 2.0964 – 2.1276

The ECB have cut rates and the interest rate differential with the AUD looks set to increase in the favour of the commodity currency. The AUD/EUR cross fell all the way to 0.5900, only to regain ground, following the August resurgence, to trade up above 0.6050. The commodity demand and interest rate differentials support a stronger AUD on the cross with the EUR.

Current Level: 1.6454
Resistance: 1.6600
Support: 1.6393
Last Weeks Range: 1.6445- 1.6570

The ECB have cut rates and the interest rate differential with the AUD looks set to increase in the favour of the commodity currency. The AUD/EUR cross fell all the way to 0.5900, only to regain ground, following the August resurgence, to trade up above 0.6050. The commodity demand and interest rate differentials support a stronger AUD on the cross with the EUR.

Current Level: 0.6035
Resistance: 0.6100
Support: 0.6000
Last Weeks Range: 0.6010- 0.6040

The Bank of England have cut interest rates, thereby attracting flows to the AUD, commodity currency. The cross rate has not varied too greatly as the GBP undergoes a honeymoon period, under the new Labour Government, and support for the GBP has been improving. This will likely not continue and expect the downward pressure, on the cross, to favour the AUD.

Current Level: 1.9525
Resistance: 1.9800
Support: 1.9230
Last Weeks Range: 1.9267- 1.9531