NZD

Market Overview

• Long term US yield prices hit a 2007 high overnight.
• The Hollywood writers’ strike has ended agreeing on a deal after 146 days of negotiating.
• Fed’s Bowman, Further hikes likely to counter high inflation.
• The ECB has confirmed the interest rate at 4.5% will remain for some time and will do a lot to bring down inflation to the 2% band. Predictions are that the Eurozone will also avoid a recession.
• The Canadian Dollar (CAD) is the strongest currency in the month of September thus far with the British Pound (GBP) the worst performer.

US Dollar (USD) weakness moved the New Zealand Dollar (NZD) to 0.5980 midweek before reversing profits to 0.5900 levels. The Federal Reserve held their cash rate at 5.50% with prospects of another hike later this year as the economy expands at a decent pace. Recent months of positive incoming data has the Fed on high inflation alert. New Zealand grew by a staggering 0.9% in the quarter ending June 2023 yanking the economy out of a technical recession after stalling in the last 2 quarters. The RBNZ will now have work to do determining if they will need to raise rates again to deflate the economy if they deem it to be running above capacity. They will be concerned around rising inflation and wage growth. Forecasts are still for a slow recovery in 2024 and 2025 before things return to normal in late 2025. We expect the kiwi to remain under pressure over the next week.

The current interbank midrate is:   NZDUSD 0.5919

The interbank range this week has been:   NZDUSD 0.5894- 0.5985

The New Zealand Dollar (NZD) broke out from the long-term bear channel Wednesday against the Australian Dollar (AUD) passing 0.9210 (1.0860) on its way to clock 0.9270 (1.0790) early morning Friday. The RBA meeting minutes considered a 25-point hike at their September meeting but chose to hold based on risks the economy could slow considerably more than forecasts. NZ Growth published at an unbelievable 0.9% for the second quarter of 2023 after forecasts were for a 0.4% number. This will certainly have the RBNZ thinking on whether the economy is “deflationary” enough to not need to hike rates again. Australian 3rd quarter CPI publishes next week expected to come in under 6.0%

The current interbank midrate is:NZDAUD 0.9243    AUDNZD 1.0810

The interbank range this week has been: NZDAUD 0.9164- 0.9251    AUDNZD 1.0810- 1.0912

The Australian Dollar (AUD) lost momentum towards week’s end pulling back from 0.6080 (1.6450) to 0.6035 (1.6570) , prices into Tuesday extended lower to 0.6025 (1.6600) as the Euro (EUR) took charge post last week’s ECB hike. Focus now lies with the time the ECB may hold rates at 4.50% with projections they were going to deliver cuts next year. Although economic considerations have fallen short the underlying labour markets remain robust. Lagarde speaks Thursday before French and German manufacturing. We may see the EUR continue to push higher this week across the board.

Current Level: 1.6603
Resistance: 1.7000
Support: 1.6350
Last Weeks Range: 1.6453 – 1.6795

The Australian Dollar (AUD) lost momentum towards week’s end pulling back from 0.6080 (1.6450) to 0.6035 (1.6570) , prices into Tuesday extended lower to 0.6025 (1.6600) as the Euro (EUR) took charge post last week’s ECB hike. Focus now lies with the time the ECB may hold rates at 4.50% with projections they were going to deliver cuts next year. Although economic considerations have fallen short the underlying labour markets remain robust. Lagarde speaks Thursday before French and German manufacturing. We may see the EUR continue to push higher this week across the board.

Current Level: 0.6023
Resistance: 0.6115
Support: 0.5880
Last Weeks Range: 0.5954- 0.6077

The Australian Dollar (AUD) is drifting around the 0.5200 (1.9240) zone early Tuesday against the British Pound (GBP) having outperformed last week from 0.5115 (1.9550) levels. It’s a big calendar of data on the books this week- the Bank of England (BoE) are predicted to raise interest rates from 5.25% to 5.50% Thursday however CPI releases the day prior which could put a cat amongst the pigeons if the figure is above 7.0% forecast raising questions of further hiking not to mention pushing up the value of the GBP. Baileys post release will be key. UK Retail Sales and Manufacturing print at the end of the week. A push through 0.5225 (1.9140) looks unlikely.

Current Level: 1.9230
Resistance: 1.9900
Support: 1.8975
Last Weeks Range: 1.9194 – 1.9553

With the ECB hiking rates last week from 4.25% to 4.50% this has given the Euro (EUR) new interest as it moves off the low of 1.7950 (0.5570) Friday to 1.8075 (0.5530) into Tuesday trading. We still need to see the pair retest the bottom of the channel at 0.5500 (1.8170) before a signal to further downside arises. Late in the week we have Eurozone manufacturing publishing but before this NZ GDP q/q. With 0.4% expected this should bring NZ out of a technical recession. The 50 day Moving average suggests a downside bias for the kiwi over the week.

Current Level: 1.8066
Resistance: 1.9420
Support: 1.7700
Last Weeks Range: 1.7942 – 1.8251

With the ECB hiking rates last week from 4.25% to 4.50% this has given the Euro (EUR) new interest as it moves off the low of 1.7950 (0.5570) Friday to 1.8075 (0.5530) into Tuesday trading. We still need to see the pair retest the bottom of the channel at 0.5500 (1.8170) before a signal to further downside arises. Late in the week we have Eurozone manufacturing publishing but before this NZ GDP q/q. With 0.4% expected this should bring NZ out of a technical recession. The 50 day Moving average suggests a downside bias for the kiwi over the week.

Current Level: 0.5535
Support: 0.5150
Resistance: 0.5650
Last week’s range: 0.5479 – 0.5573

The New Zealand Dollar (NZD) looked steady Monday trading around the weekly open at 0.4775 (2.0940) against the British Pound (GBP), will the kiwi extend higher for the 5th straight week is the question. If it can get past 0.4800 (2.0850) resistance it has every chance. We have a full week of data announcements in the cross starting with UK CPI Thursday followed by NZ GDP then BoE cash rate release before UK Retail Sales and Manufacturing. NZ GDP is predicted to show 0.4% for the second quarter bringing NZ formally out of a recession, meanwhile UK CPI is predicted to print around 7.0% y/y in August from 6.8% as the Bank of England hike rates from 5.25% to 5.5% in order to stop runaway inflation. We don’t imagine too much upside this week for the NZD BoE, speak will be key.

Current Level: 2.0933
Resistance: 2.1600
Support: 2.0700
Last Weeks Range: 2.0930 – 2.1210