NZD/USD Transfer:

Despite the New Zealand Dollar (NZD) dropping off Mondays open below 0.6200 to 0.6190 against the US Dollar (USD) the cross is still trading in its bull channel from late May’s 0.5985 level. A break below 0.6170 however should support a trend shift back towards 0.6100 zones. The recent drop into recession by the NZ economy after GDP first quarter printed at -0.1% should keep the kiwi fundamentally limited to the north especially with the Federal Reserve remaining hawkish over further rate hikes. US Manufacturing data and Fed chair Powell testified towards the end of the week.

Current Level: 0.6199
Resistance: 0.6360
Support: 0.6100
Last Weeks Range: 0.6104-0.6246

FX Update: Kiwi Back Under Pressure

Market Overview

Key Points:

• New Zealand second quarter consumer confidence 83.1 vs 77.7 prior
• ECB confirms we will see a rate hike in July, but September is uncertain.
• Airbus lands second massive order of aircraft from India this year of 500 planes following the previous order of 470 making this the biggest order in history with a value of over 300B.
• China cuts lending rates as the economy starts to slow, the PBOC projected to cut rates again on the 20th of June.
• North Korea is said to be increasing its nuclear weapons production.
• The British Pound (GBP) has been the standout performer in the past week compared to the Japanese Yen (JPY), the worst performing currency. Read more

Calendar of Economic Releases

Tuesday June 20 All Day USD Bank Holiday
1:30pm AUD Monetary Policy Meeting Minutes

Wednesday June 21 6:00pm GBP CPI y/y
Forecast: 8.40%
Previous: 8.70%

Thursday June 22
12:30am CAD Core Retail Sales m/m
Forecast: 0.30%
Previous: -0.30%
12:30am CAD Retail Sales m/m
Forecast: 0.30%
Previous: -1.40%
2:00am USD Fed Chair Powell Testifies
All Day CNY Bank Holiday
8:00pm USD FOMC Member Waller Speaks
11:00pm GBP MPC Official Bank Rate Votes
Forecast: 7-0-2
Previous: 7-0-2
11:00pm GBP Monetary Policy Summary
11:00pm GBP Official Bank Rate
Forecast: 4.75%
Previous: 4.50% Read more

This Weeks Key Points

The ECB raised their benchmark interest rate to 4.00% from 3.75% with Lagarde saying another hike was expected in July.
New Zealand House Price medium in May is unchanged from April.
China is expected to step in supporting the housing sector further to boost growth.
Recent forecasts are predicting the UK to narrowly avoid drifting into a recession.
The Peoples Bank of China cuts the interest rate from 2.75% to 2.65%.
Analysts are predicting many more rate hikes from the Bank of England to come.
Australian Unemployment dips to 3.6% from 3.7%.
New Zealand Manufacturing contracted in May, the index at 48.9 following 3 months of poor performance and well under the long-term average of 53.0.
The Australian Dollar (AUD) has been the standout performer in the week or May compared to the Japanese Yen (JPY) , the worst performing currency.

NZD/GBP Transfer:

The British Pound (GBP) recovered off 2.0340 (0.4915) midweek post the Bank of England (BoE) release clawing back losses against the New Zealand Dollar (NZD) to 2.0550 (0.4865) into Friday. UK GDP rose 0.2% in the month of May with the biggest contribution coming from food and beverage and strong wage growth. The BoE will hike at least one more time in efforts to bring down inflation. Meanwhile NZ q/q GDP also printed – the result not pretty with the economy dropping into a recession with a print of -0.1% following -0.6% in the fourth quarter. Market analysts seem to be on the fence with the timing of rate hikes, many predicting cuts could happen as soon as late this year. The determining factor could be in wages data – if unemployment rises this could be the signal the RBNZ needs. Downside bias remains for the kiwi.

The current interbank midrate is: NZDGBP 0.4878 GBPNZD 2.0500
The interbank range this week has been: NZDGBP 0.4864- 0.4916 GBPNZD 2.0340- 2.0558

AUD/USD Transfer:

The Australian Dollar (AUD) has continued to push higher against the US Dollar (USD) into Friday sessions, the cross reaching 0.6880 a fresh late February 2023 high. Poor Chinese data hasn’t held back the AUD with Industrial Production, Retail Sales and House prices all releasing worse than predicted. Australian employment figures improved in May showing the unemployment dropped from 3.7% to 3.6% as participation grew 79,000. This doesn’t paint the picture the RBA has in mind for a slowing economy casting questions over probability of further hikes from the RBA. The RBA governor Lowe saying inflation pressures are rising and further tightening may be required. Recession fears in the US have eased with analysts left scratching heads over how the economy has been so resilient. The Fed leaving their rate unchanged at 5.25% yesterday while the door is still open for further tightening in July and maybe November.

The current interbank midrate is: AUDUSD 0.6884
The interbank range this week has been: AUDUSD 0.6726- 0.6892

NZD/USD Transfer:

Another big day in US equities took the New Zealand Dollar higher, extending the bull run from last week against the US Dollar (USD) to the 0.6230 zone. The New Zealand economy slipped into a technical recession with GDP results published yesterday for the 1st quarter at -0.1% adding to the fourth Q result of -0.6%. Two schools of thought suggest NZ could be either hiking by year end or conversely the RBNZ will hold until mid-2024. The job market holds the key in our minds, unemployment data is not published until 1st August, anything tight around current 3.40% showing persistence could ultimately force the hand of the RBNZ. Meanwhile the US Fed kept their interest rate on hold at 5.25% pausing as they said they would, ending a 10-run streak of hikes. The hawkish tone of inflation remains with expectations of further hikes in July and possibly November. Despite the run north by the kiwi over the past 2 weeks we still maintain our dovish view of the kiwi over the mid to long term.

The current interbank midrate is: NZDUSD 0.6237
The interbank range this week has been: NZDUSD 0.6104- 0.6242

AUD/GBP Transfer:

The Australian Dollar (AUD) has done well over the week to hold ground around 0.5385 (1.8570) areas after a slew of poor data published in China. However, with wage growth figures up- the unemployment rate dropping from 3.7% to 3.6% this has cast doubt over forecasting that the economy is slowing with employment participation increasing over 79k in the month of May. We see further tightening in the coming months eventuating and the widening yield differentials pushing the cross into 0.5260 (1.9000) territory over the coming weeks.

The current interbank midrate is: AUDGBP 0.5381 GBPAUD 1.8583
The interbank range this week has been: AUDGBP 0.5347- 0.5406 GBPAUD 1.8497- 1.8699

NZD/AUD Transfer:

New Zealand’s GDP came in softer than predicted, contracting -0.1% for the first quarter 2023 to go with the -0.6% in the fourth quarter of 2022 pushing the country into a formal recession. Recent weather and soaring interest rates have taken a toll on the consumer. Signs are the economy could be in for several poor quarters increasing the likelihood of the RBNZ cutting rates. At the moment the central bank are not predicted to start cutting until mid-2024, we expect this to be reviewed formally over the coming weeks. Aussie jobs data came in hot with the unemployment rate dropping from 3.7% to 3.6% suggesting the RBA could be eying up further tightening in the coming months. A close below the key support at 0.9000 (1.1110) over the next few days would give guidance for further weakness in the NZD.

The current interbank midrate is: NZDAUD 0.9062 AUDNZD 1.1030
The interbank range this week has been: NZDAUD 0.9052- 0.9148 AUDNZD 1.0931- 1.1047

AUD/EUR Transfer:

A market shift in sentiment has taken the Australian Dollar (AUD) off recent lows around 0.6060 (1.6500) to 0.6275 (1.5930) this morning against the Euro (EUR) , a decent swing in a short amount of time. Comments from Villeroy around the slowdown in France’s inflation and soft data out in Italy have had the Euro on the backfoot. However, talk of higher interest rates should have the Euro well supported on dips. Looking ahead we have ECB’s interest rate and monetary policy out Friday with expectations of a hike from 3.75% to 4.00%- their 8th consecutive hike, in theory this should give the EUR a nudge. This comes as the European area slips into recession.

Current Level: 0.6273 (1.5941)
Resistance: 0.6290 (1.6150)
Support: 0.6190 (1.5900)
Last Weeks Range: 0.5638-0.5694 (1.7561-1.7734)