USD

European economies are suffering recessionary economic conditions, as confirmed by the flash PMI data released this week. Final PMI data will probably confirm this, in the coming week, while the market focus will turn to European growth and inflation. EU and member states inflation and GDP growth rates are set to be released, this coming week, and this will determine how the ECB will plan monetary policy. If inflation is confirmed as resurgent then rates will remain higher for longer. Alternatively, if GDP growth rates remain dire, the ECB may be encouraged to stimulate the European economy with rate cuts.

Current Level: 0.5631
Support: 0.5555
Resistance: 0.5665
Last week’s range: 0.5577 – 0.5651

The GBP has been fairly static, but may show some signs of life in the coming week, due to the Bank of England rate decision. Inflation in the UK jumped back to 4%, from 3.9%, reversing sharp recent falls. This will only encourage the Bank of England to leave interest rates ‘higher for longer’, thus supporting a stronger Pound.

Current Level: 2.0820
Resistance: 2.0965
Support: 2.0695
Last Weeks Range: 2.0710- 2.0937

The GBP has been fairly static, but may show some signs of life in the coming week, due to the Bank of England rate decision. Inflation in the UK jumped back to 4%, from 3.9%, reversing sharp recent falls. This will only encourage the Bank of England to leave interest rates ‘higher for longer’, thus supporting a stronger Pound.

Current Level: 0.4823
Resistance: 0.4840
Support: 0.4765
Last Weeks Range: 0.4776 – 0.4828

The AUD and NZD have both been in a reasonably tight trading range for the last week, with NZ inflation easing and Australian flash PMI data showing recessionary economic conditions. The cross rate has been tight, trading between 0.9200 and 0.9300, with no major moves expected to the upside or downside.

Current Level: 1.0784
Resistance: 1.0855
Support: 1.0731
Last Weeks Range: 1.0752 – 1.0832

The AUD and NZD have both been in a reasonably tight trading range for the last week, with NZ inflation easing and Australian flash PMI data showing recessionary economic conditions. The cross rate has been tight, trading between 0.9200 and 0.9300, with no major moves expected to the upside or downside.

Current Level: 0.9265
Resistance: 0.9315
Support: 0.9215
Last Weeks Range: 0.9231 – 0.9300

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