NZD

NZ Q4 Inflation data confirmed inflation is declining fast, falling from 5.6% to 4.7%, easing the pressure on the RBNZ. The easing of inflationary conditions in New Zealand will allow monetary policy to at least neutralise in 2024, with a view to rate cuts later in the year. Bond yields will start to fall and this will ease pressure on the NZ Dollar. The NZD has traded around 0.6100 for the last week, but will rely on easing monetary conditions in the US for any upside.

Current level: 0.6105
Support: 0.6055
Resistance: 0.6175
Last week’s range: 0.6064-0.6145

Moves in the Australian Dollar (AUD), New Zealand Dollar (AUD) cross extended off 0.9275 (1.0780) Monday from mid week’s 0.9365 (1.0680) as the Aussie eyes a fresh yearly high around 1.0830 (0.9230). The IMF has suggested the RBA should cut spending and hike rates further in order to reduce inflation targets back to the target band before 2026. This will have certainly been factored into recent AUD demand. The economic docket is thin this week in the pair with only NZ CPI y/y printing. Forecast is for a fall of 0.5% in the fourth quarter down from 1.8% in the third quarter. Year on year should print around 4.7% down for 5.6% confirming further pressure for the RBNZ to cut rates mid year or sooner. Australia Day Holiday Friday should see the cross meander into the close.

The current interbank midrate is: NZDAUD 0.9245 AUDNZD 1.0809

The interbank range this week has been: NZDAUD 0.9243- 0.9289 AUDNZD 1.0765- 1.0818

The New Zealand Dollar (NZD) has been sold off heavily in 2024 after starting the year at 0.6300 levels it has fallen to 0.6080 against the US Dollar (USD). NZ Manufacturing PMI’s were down to 43.1 from 46.5, together with talk around rate cuts have had a negative impact on the kiwi. NZ CPI tomorrow is due to publish much lower than the previous quarter of 5.6% y/y at 4.7% y/y confirming rate cuts should start around mid-year. Current forecasts are that inflation is predicted to be back around the target range of 1-3% by the third quarter. The cross is looking oversold to us at current levels, we would need to see a break below 0.6000 to confirm a bearish trend and take the heat off upside moves.

The current interbank midrate is: NZDUSD 0.6077

The interbank range this week has been: NZDUSD 0.6067- 0.6137

The European economy is in recessionary territory, with the added pressures of resurgent inflation. Inflation and bond yields had been collapsing in Europe, towards the latter part of 2023, with a combination of tumbling inflation and recessionary economic conditions. A resurgent inflation will ensure tight monetary conditions remain in place for an extended period. This will support the EUR (although ensure recessionary conditions remain). Similar pressures exist in the Australian economy so the cross rate will not move dramatically.

Current Level: 1.6611
Resistance: 1.6260
Support: 1.6666
Last Weeks Range: 1.6260 – 1.6611

The European economy is in recessionary territory, with the added pressures of resurgent inflation. Inflation and bond yields had been collapsing in Europe, towards the latter part of 2023, with a combination of tumbling inflation and recessionary economic conditions. A resurgent inflation will ensure tight monetary conditions remain in place for an extended period. This will support the EUR (although ensure recessionary conditions remain). Similar pressures exist in the Australian economy so the cross rate will not move dramatically.

Current Level: 0.6020
Resistance: 0.6150
Support: 0.6000
Last Weeks Range: 0.6020 – 0.6100

The surge in UK inflation, rising back to 4% this week, will ensure the Bank of England remains hawkish in their monetary policy, for the early part of 2024. This will support the GBP and add to the weaker economic conditions, domestically. The interest rate differential may support a stronger pound although RBA actions may dimmish the differential.

Current Level: 1.9398
Resistance: 1.9047
Support: 1.9417
Last Weeks Range: 1.9011 – 1.9398

European economies are suffering recessionary economic conditions and a resurgence in inflation, dimming the likelihood of interest rate cuts in 2024 and adding to tight monetary conditions. The tight money conditions have supported the EUR, although weaker trade and growth do not auger well for 2024.

Current Level: 1.7889
Resistance: 1.7699
Support: 1.7921
Last Weeks Range: 1.7637 – 1.7899

European economies are suffering recessionary economic conditions and a resurgence in inflation, dimming the likelihood of interest rate cuts in 2024 and adding to tight monetary conditions. The tight money conditions have supported the EUR, although weaker trade and growth do not auger well for 2024.

Current Level: 0.5590
Support: 0.5580
Resistance: 0.5650
Last week’s range: 0.5590 – 0.5670

The GBP has been supported by a hawkish Bank of England monetary policy for much of 2023, but had signalled a more neutral 2024. The rebound in inflation in the UK in early 2024, will only serve to reinforce the Central Banks tight policy and add support for the Pound. The cross rate is likely to have a downward bias on the short term.

Current Level: 2.0920
Resistance: 2.0618
Support: 2.1052
Last Weeks Range: 2.0618- 2.0920