Markets have been consumed by a global bond market crisis. This began in the Japanese bond market, which was bailed out, by an intervention from the US Treasury. Last week the bond crisis spread to engulf the US and Europe. This was triggered by surging inflation, which was, in turn, caused by the energy crisis as a direct result of the Middle East war. This is spinning out of control and will take concerted action from global Central Banks and Treasuries to right the ship. It may be very fortunate that global Central Bankers meet for the annual Jackson Hole Symposium this week.
Global markets are consumed by the growing bond crisis. Bond yields in the US and Europe are spiking to dangerously high levels, which has driven the US Treasury to intervene and double their long-dated bond purchases. This is due to a combination of inflationary pressures, triggered by the energy crisis and the record levels of deficit and debt, accrued in the US and Europe. Global markets are just that and the NZD is not an ‘Island’. NZ PPI doubled to 2.9%, signalling a big spike in inflation coming, which will force the hand of the RBNZ. They will probably be forced to raise rates, which will ensure the NZD remains bid, in the short term. The NZD is looking to regain the ‘Big Figure’ of 0.6000.
Current Level: 0.5959
Support: 0.5900
Resistance: 0.6000
Last week's range: 0.5859- 0.5987
Inflationary pressures have hit both the Australian and New Zealand economies and this has led to further pressure on the respective Central Banks to raise rates. This has supported short-term strength in both currencies, so the cross-rate has bounced between 0.8300 and 0.8400. Relative interest rate differentials will determine the cross-rate.
Current Level: 0.8332
Support: 0.8265
Resistance: 0.8390
Last week's range: 0.8271-0.8371
Current Level: (1.1993)
Support: (1.1920)
Resistance: (1.2100)
Last week's range: (1.1946-1.2090)
The GBP has risen in tandem with the NZD allowing for a tight trading range. The cross-rate has traded between 0.4330 and 0.4390. UK 10-year Gilts have jumped above the important 5% yield, reflecting inflationary pressures and fiscal imbalance. The focus has been in the US and Japanese Bond markets, but the UK is tainted with the same brush.
Current Level: 0.4370
Support: 0.4350
Resistance: 0.4385
Last week's range: 0.4330-0.4386
Current Level: (2.2883)
Support: (2.2800)
Resistance: (2.3000)
Last week's range: (2.2796-2.3093)
The weakness of the US Dollar, has dominated currency trading, over the last week or so. The upheaval in the US bond market, has hammered the reserve currency, so the NZD and EUR have both gained ground. This has allowed the cross rate to remain in the tightish trading range, between 0.5060 and 0.5130 and this is likely to continue in the short-term.
Current Level: 0.5108
Support: 0.5050
Resistance: 0.5120
Last week's range: 0.5060-0.5125
Current Level: (1.9577)
Support: (1.9520)
Resistance:(1.9800)
Last week's range: (1.9519-1.9755)
The crash in the reserve currency, triggered by the upheaval in global bond markets, has allowed for the AUD to stage a recovery. The AUD has surged back towards 0.7200, a reflection of a weak US Dollar, rather than any inherent strength in the commodity currency. Australia inflation is on the rise again, along with unemployment, as the economy is buffeted by a resurgent energy crisis. A hot reading from this week’s Australian CPI number, will add pressure to the RBA, to raise rates and support the currency short-term.
Current Level: 0.7148
Support: 0.7070
Resistance: 0.7200
Last week's range: 0.7066- 0.7176
UK Gilts have not been immune, to the spike in bond yields, with long-dates jumping above 5%. The UK has the very same problems as the US and Japan, massive deficits and debt, in conjunction with rising inflation. The energy crisis is the cause of the recent spike in inflation but it appears a ‘prefect storm’ may be on the horizon?
Current Level: 0.5241
Support: 0.5200
Resistance: 0.5265
Last week's range: 0.5210-0.5265
Current Level: (1.9080)
Support: (1.9000)
Resistance: (1.9220)
Last week's range: (1.8997-1.9190)
The bond market crisis has engulfed European markets. bond yields have spiked in Europe, Asia and the USA. It appears no-one is immune from this crisis. The US Treasury is attempting mitigation programs, buying back long-dated bonds, but this only had a brief impact. The Treasury will likely look to the Federal Reserve, for concerted action.
Current Level: 0.6126
Support: 0.6060
Resistance: 0.6155
Last week's range: 0.6080-0.6155
Current Level: (1.6323)
Support: (1.6250)
Resistance: (1.6500)
Last week's range: (1.6250-1.6444)
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