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The English Pound (GBP) continued its run lower extending off last week’s 0.5155 (1.9400) level reaching 0.5290 (1.8900) Wednesday against the New Zealand Dollar (NZD) after PMI reads were soft and budget deficits were terrible. This area is the top of a recent range going back to late September last year. However, the GBP reversed most of the losses heading into Thursday with NZ CPI releasing bang on expectations at 7.2% y/y taking price back to 0.5230 (1.9130). With CPI printing as expected for the fourth quarter this should keep the door open for further interest rate hikes over the next few months to a peak of 5.25%. Looking ahead we have NZ job’s report and Bank of England Monetary Policy report next week.

The current interbank midrate is: NZDGBP 0.5222 GBPNZD 1.9149
The interbank range this week has been: NZDGBP 0.5207- 0.5291 GBPNZD 1.8897- 1.9202

NZ Inflation rose slightly more than was expected in the last quarter of 2022- 1.4% vs expectation of 1.3%, taking the year to date in December to 7.2%. Stubborn CPI will mean the RBNZ should hike their cash rate 50 points in the February meeting taking it to 4.95% the highest since December 2008. The New Zealand Dollar (NZD) was moderately higher on the news reaching 0.6525 as it targeted the June 2022 high of 0.6540. Friday’s key US PCE Price index data a good measure of inflation should cement what the Fed do next, possibly confirming the threat that inflation is easing. Will we see the Fed push back on their predicted 50-point rise – this is clearly the biggest event risk on the calendar next week. A retest of 0.6600 is probable.

The current interbank midrate is: NZDUSD 0.6477
The interbank range this week has been: NZDUSD 0.6435- 0.6524

Key Points:

Action midweek has been of a risk off nature with equity markets under pressure and
the greenback recovering
The Bank of Canada hiked their interest rate 25 points to 4.5% saying they may hold
fire a while they rethink the state of the current economy
Australian 4th Quarter inflation came in hot at 1.9% taking the year-on-year number
to 7.8% up from 7.3% Read more

Monday 23/01
All Day, CNY, Bank Holiday

Tuesday 24/01
All Day, CNY, Bank Holiday
10:30pm, GBP, Flash Manufacturing PMI
Forecast: 45.4
Previous: 45.3
10:30pm, GBP, Flash Services PMI
Forecast: 49.6
Previous: 49.9

Wednesday 25/01
3:45am, USD, Flash Services PMI
Forecast: 45
Previous: 44.7
10:45am, NZD, CPI q/q
Forecast: 1.60%
Previous: 1.80%
1:30pm, AUD, Trimmed Mean CPI q/q
Forecast: 1.60%
Previous: 1.80% Read more

Tuesday 17/01
All Day, USD, Bank Holiday
4am, GBP, BOE Gov Bailey Speaks
3:00pm, CNY, GDP q/y
Forecast: 1.60%
Previous: 3.90%
8:00pm, GBP, Claimant Count Change
Forecast: 19.8K
Previous: 30.5K

Wednesday 18/01
2:30am, CAD, CPI m/m
Forecast: -0.60%
Previous: 0.10%
2:30am, CAD, Median CPI y/y
Forecast: 4.90%
Previous: 5.00%
2:30am, CAD, Trimmed CPI y/y
Forecast: 5.20%
Previous: 5.30%
2:30am, USD, Empire State Manufacturing Index
Forecast: -8.7
Previous: -11.2
Tentative, JPY, BOJ Outlook Report
Tentative, JPY, Monetary Policy Statement
Tentative, JPY, BOJ Press Conference
8:00pm, GBP, CPI y/y
Forecast: 10.50%
Previous: 10.70% Read more

Monday 09/01
All Day, JPY, Bank Holiday

Tuesday 10/01
11:10pm, CAD, BOC Gov Macklem Speaks
11:10pm, JPY, BOJ Gov Kuroda Speaks

Wednesday 11/01
3:00am, USD, Fed Chair Powell Speaks
1:30pm, AUD, CPI y/y
Forecast: 7.30%
Previous: 6.90% Read more

The New Zealand Dollar (NZD) continues to push higher against the US Dollar (USD) with prices reaching low 0.65’s recently as risk improves and the greenback comes under pressure. This week however we have seen the kiwi drift back to 0.6300 levels as markets start to thin out for xmas and new year breaks. Overall pressures remain for the NZD as the recent trend is predicted to stall as we ponder a bigger picture downward extension as the rally ends. Initially the NZD held up post the bumper 3rd quarter GDP result coming in at 2.0% vs 0.8% expected following a 1.9% in the second quarter, the services industry the main driver. Meanwhile US consumer confidence jumped to its highest levels in 8 months since inflation has eased and gas prices have dropped. Topside moves above 0.6500 look unlikely.

The current interbank midrate is: NZDUSD 0.6297
The interbank range this week has been: NZDUSD 0.6276- 0.6408

The Australian Dollar (AUD) was unable to hold prices around the 0.6900 area late last week against the US Dollar (USD) slipping to 0.6700 on risk sentiment and a slew of poor data releases. Iron Ore prices added to the heavier tone currently trading around the 110 level. PMI figures were a miss also along with building stats with the Aussie clocking 0.6630. US Consumer Confidence was up- the strongest read in 8 months. The Federal Reserve raised rates 50 points to 4.50% slowing the pace of their recent 75 point moves but cautioned that additional rate rises were needed to combat inflation as the growth outlook forecast for 2023 deteriorated. Heading into Christmas markets will be thin, and prices shouldn’t swing too far from where they currently sit around the 0.6700 zone.

The current interbank midrate is: AUDUSD 0.6707
The interbank range this week has been: AUDUSD 0.6628- 0.6742

The New Zealand Dollar (NZD) reached a fresh high of 0.9550 (1.0470) against the Australian Dollar (AUD) to close out the week the highest levels since December last year. Central bank divergence has been the main catalyst for the recent giant move in the kiwi from 0.8700 (1.1500) levels back in September. The outlook is for more tightening to take place for the RBNZ and not enough for the RBA, the scenario is priced into the “rates curve” with sentiment and a shift back to a more neutral policy view down the road supporting a possible trigger of a reversal towards 0.9000 (1.1100). Push backs by the Aussie this week have price back around 0.9390 (1.0650). No data is due on the docket for the cross until 11 Jan 2023 Australian CPI release. Prices above 0.9350 represent good buying of AUD.

The current interbank midrate is: NZDAUD 0.9380 AUDNZD 1.0643
The interbank range this week has been: NZDAUD 0.9372- 0.9545 AUDNZD 1.0476- 1.0669