• Israel and US militaries are planning to strike Iran post the US midterms with Iran threatening wider retaliation, oil will no doubt be the loser putting further pressures on energy prices.
• NZ CPI ending September came in at 3.7%, slightly down on the 3.8% markets were predicting. Although this is positive it won’t be enough to sway the RBNZ not to hike at next week’s policy meeting. The inflation figure is still miles outside the comfort target zone of 1-3%. Oil is the key factor already the largest contributor to inflation with expectations prices are likely to rise in the fourth quarter and keep the central bank in a tightening cycle. Markets have priced in a further 50 points by February 2027.
• Markets are expecting a November Bank of England (BoE) rate hike and again in February 2027 with a peak of 4.25% saying rises to energy costs will push inflation above 4.0%.
• Markets are pricing in a 20% chance the Fed will hike again in 2026.
• US Jobless claims fell to 194,000 down 6,000 on the prior week which could further support the US Dollar (USD) by reducing the need for rate cuts.
• The Canadian Dollar (CAD) has been the best performing currency this week on the main board while the Australian Dollar (AUD) is the worst performer.
The New Zealand Dollar (NZD) continues to edge higher against the US Dollar (USD) clocking a 4-week high of 0.5710 yesterday on improved risk sentiment before dropping back on CPI data. NZ inflation for the 3rd quarter came in at 0.7% below estimates of 0.8% dropping the y/y rate to 3.7% from 4.1% still way outside the 1-3% target. Petrol was the largest contributor rising 19.0% based on rising oil prices. Meanwhile markets have scaled back Fed chances of a hike at next week’s meeting with an 80% chance still of a hike in December. The RBNZ will hike its interest rate next week to 3.0%, we could see the kiwi push higher into the release.
The current interbank midrate is: NZDUSD 0.5680
The interbank range this week has been: NZDUSD 0.5647- 0.5709
The New Zealand Dollar (NZD) has struggled to hold levels around 0.8145 (1.2280) over the past few days falling back to trade into Friday at 0.8100 (1.2350). NZ CPI y/y for September came in at 3.7%, down from 4.1% in August but still much higher than the RBNZ would like. Both central banks are grappling with extended rate hikes over the coming months, in a race to the top, while the timing is unclear it’s certainly a deteriorating space with uncertain energy costs keeping inflation high. We expect the RBNZ to hike at least twice more before February next year. We pick a retest of the zone around 0.8150 (1.2270) in the next couple of weeks.
The current interbank midrate is: NZDAUD 0.8095 AUDNZD 1.2345
The interbank range this week has been: NZDAUD 0.8084- 0.8134 AUDNZD 1.2293- 1.2370
Moves this week in the British Pound (GBP), New Zealand Dollar (NZD) has been a mixed bag with both UK and NZ CPI releasing. While inflation in the UK rose in September from 3.1% to 3.5%, NZ tracked lower off 4.1% to 3.7%. Prices travelled off 0.4200 (2.3810) to 0.4270 (2.3420) between the two publications, but the kiwi failed to reconcile falling back to 0.4240 as risk sentiment wanned. Expectations are for a rate hike from the BoE in November while next week’s RBNZ meet will unanimously hike to 3.0%. We struggle to see prices ploughing past 0.4230 (2.3650) levels any time soon.
The current interbank midrate is: NZDGBP 0.4240 GBPNZD 2.3585
The interbank range this week has been: NZDGBP 0.4240- 0.4263 GBPNZD 2.3457- 2.3583
Offsetting hawkish factors have supported the Australian Dollar (AUD) over the week against the US Dollar (USD) reaching 0.7035 in the face off weighing tensions in the Middle East. Deputy RBA Governor Hauser said the inflation outlook has deteriorated lifting expectations for further rate hikes as soon as November 3rd. The next target topside is resistance at the 0.7070 level, a squeeze through this zone on the daily and we could see 0.7200 develop.
The current interbank midrate is: AUDUSD 0.7016
The interbank range this week has been: AUDUSD 0.6945- 0.7035
The Australian Dollar (AUD), British Pound (GBP) has been bumping around 0.5240 (1.9080) levels for most of the week without much fuss. UK CPI published up on expectations of 3.4% at 3.5% beating August’s 3.1% y/y causing concerns for the Bank of England (BoE) policy forecasts. Expectations of a Nov 6 rate high is about 95% with the central bank pricing in more hikes to hold policy tight. A squeeze to 0.5200 (1.9220) is possible, meeting the late July low.
The current interbank midrate is: AUDGBP 0.5237 GBPAUD 1.9095
The interbank range this week has been: AUDGBP 0.5223- 0.5256 GBPAUD 1.9023- 1.9145
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