JPY

The decline in the NZD continues, triggered by the RBNZ newfound religion of rate cutting, but accelerated by the surge in the strength of the US Dollar. US Bond Yields have been the story of the week in markets, which continue to defy and contradict the Fed, who aggressively cut rates by 50 basis points, as a US Presidential Election bonus. US 10-Year bonds have surged to 4.25%, despite the Fed’s rate cuts, and clearly dovish monetary stance. This has boosted the reserve and forced the NZD back under 0.6000. The US election is fast approaching, which will influence markets, while other Geo-Political events have the capacity to cause upheaval.

Current Level: 0.6005
Support: 0.5900
Resistance: 0.6200
Last week’s range: 0.5990- 0.6060

The AUD has been hit by a relentless rise in the US Dollar reserve, but has performed relatively well, compared to comparable currencies. The reason is the steadfast tight monetary position the RBA has held, in an attempt to stamp out stubbornly high inflation. The relatively good performance of the OZZY, has been due to monetary policy, and this is likely to continue until the RBA sees a creditable turn in the inflation trend line. The AUD trades around 0.6700.

The current interbank midrate is: AUDEUR 0.6180 EURAUD 1.6181

The interbank range this week has been: AUDEUR 0.6124- 0.6192 EURAUD 1.6148- 1.6327

The actions of the RBNZ, while the corresponding inverse was true, from the RBA. The RBA has seen inflation persist and held the line, holding interest rates ‘higher for longer’. This has ensured that the AUD has remained firmer, despite headwinds, from a relentlessly stronger reserve currency. The closing of the interest rate differential margin has driven the cross rates lower. This is likely to continue, assuming the RBA holds the line on interest rates, as indicated. The cross was driven back to 0.8900, by August, as the dovish RBNZ monetary policy became apparent. It has recovered to above 0.9000, but the downside pressures remain.

The current interbank midrate is: NZDEUR 0.5591 EURNZD 1.7885

The interbank range this week has been: NZDEUR 0.5550- 0.5608 EURNZD 1.7831- 1.8016

The UK economy has been recovering well, economically speaking, since the new Labour Government has been elected. This surprises many, as dire warnings of an economic crises (from the incoming Government) have been accentuated by warnings of fiscal tightening and tax rises. The Bank of England is likely to resume interest rate cuts, which will shadow the ECB and RBNZ. The cross rate is therefore not likely to fluctuate greatly, from current trading levels, around 0.4650.

The current interbank midrate is: NZDGBP 0.4654 GBPNZD 2.1486

The interbank range this week has been: NZDGBP 0.4625- 0.4677 GBPNZD 2.1381- 2.1621

The actions of the RBNZ, while the corresponding inverse was true, from the RBA. The RBA has seen inflation persist and held the line, holding interest rates ‘higher for longer’. This has ensured that the AUD has remained firmer, despite headwinds, from a relentlessly stronger reserve currency. The closing of the interest rate differential margin has driven the cross rates lower. This is likely to continue, assuming the RBA holds the line on interest rates, as indicated. The cross was driven back to 0.8900, by August, as the dovish RBNZ monetary policy became apparent. It has recovered to above 0.9000, but the downside pressures remain.

The current interbank midrate is: NZDAUD 0.9043 AUDNZD 1.1050

The interbank range this week has been: NZDAUD 0.9038- 0.9101 AUDNZD 1.0987- 1.1064

The NZD has come crashing down, in recent times, due to the RBNZ’s sudden awakening. Governor Orr completely missed the inflation boat. The realisation that recessionary economic conditions in the NZ economy, had crushed inflation, was a long time coming. The reaction was swift and dramatic. He cut interest rates by 75 basis points, before the release of the quarterly inflation report, trying to avoid his failures being recognised. This cut the legs out from the KIWI, which has crashed below 0.5900, only to regain some ground to trade around 0.6050. The RBNZ is likely to cut more and undermine support for the NZD, while interest rate differentials, will only add to downside pressures.

The current interbank midrate is: NZDUSD 0.6057

The interbank range this week has been: NZDUSD 0.6037- 0.610

We expect the Australian Dollar (AUD) to resume its bull run of late against the Euro (EUR) extending recent gains from 0.6120 (1.6350). The ECB are widely expected to cut their cash rate Friday morning a quarter of a percent to 3.40% which could keep the Euro on the backfoot for a while. Price has also moved back above key moving averages suggesting a shift towards the long-term high at 0.6250 (1.6000) could be the play. Aussie employment data is also publishing Thursday and should release benign with unemployment remaining at 4.2%.

Current Level: 1.6217
Resistance: 1.6360
Support: 1.6000
Last Weeks Range: 1.6110- 1.6352

We expect the Australian Dollar (AUD) to resume its bull run of late against the Euro (EUR) extending recent gains from 0.6120 (1.6350). The ECB are widely expected to cut their cash rate Friday morning a quarter of a percent to 3.40% which could keep the Euro on the backfoot for a while. Price has also moved back above key moving averages suggesting a shift towards the long-term high at 0.6250 (1.6000) could be the play. Aussie employment data is also publishing Thursday and should release benign with unemployment remaining at 4.2%.

Current Level: 0.6166
Resistance: 0.6250
Support: 0.6110
Last Weeks Range: 0.6115- 0.6207

After closing the week on a high the Australian Dollar (AUD) has given back gains into Tuesday trading around the 0.5140 (1.9450) area against the British Pound (GBP). The Pound has had the help of Industrial Production and Manufacturing prints both releasing above expectation. UK GDP m/m for August also came in at 0.2% meeting predictions after two months of stagnation. Data this week comes in the form of UK inflation with markets expecting a 0.3% fall off 2.2% y/y. Anything north of this could spell trouble for the inflation cautious Bank of England. With stimulus measures in China looking better we believe the AUD could pick up points this week and retest 0.5170 (1.9340)

Current Level: 1.9425
Resistance: 1.9560
Support: 1.9300
Last Weeks Range: 1.9241- 1.9485

The New Zealand Dollar (NZD) clawed back valuable losses mid last week from 0.5530 (1.8080) to close the week at the 0.5585 (1.7900) level. Thin markets Monday made for a volatile start to the week’s trading, the kiwi bid into Tuesday at 0.5590 (1.7890). A shifty ECB have changed their mind on rate cuts from a month ago with markets now expecting a cut to 3.40% from 3.60% early Friday. There is argument that the ECB shouldn’t cut again this week based on falls in energy prices falsely having a knock-on effect to prices, also of note wage growth has slowed despite the ECB saying it hasn’t. The kiwi could pick up a few points this week.

Current Level: 1.7917
Resistance: 1.8100
Support: 1.7700
Last Weeks Range: 1.7769 – 1.8078