• Risk appetite remains hit and miss this week as geopolitical headlines dictate central bank paths.
• Australian Unemployment rose higher than expectations yesterday coming in at 4.5% instead of 4.3% as markets were expecting, this is the highest it’s been since November 2021.
• The ECB have all but confirmed a June hike to interest rates with chances of a July hike reasonable.
• New Zealand’s Balance of Trade for April came in at 1.92B vs 0.84B expected up from March’s 0.69B nearly double the forecast.
• No deal has been reached yet in the Iran/US conflict, but sources say the gap is narrowing, the strait of Hormuz remains a strong point of contention.
• The US Dollar (USD) and Australian Dollar (AUD) have been the strongest performers this week on the main board while the Japanese Yen (JPY) has been the worst performer.
Stiff support at 0.5810 held yesterday in the New Zealand Dollar (NZD), US Dollar (USD) cross after a bout of greenback strength sent the kiwi south. Over the last 2 days risk appetite improved with the kiwi bouncing back to clock 0.5885 this morning. Fed’s Barkin was on the wires this week saying he was nervous around AI taking to many jobs with employers outside of software not yet reducing staff numbers. Reports of a draft agreement in the Strait of Hormuz has triggered a rally in equities a decline in the oil price and a softer US Dollar. If we see a result from this, we should see the NZD possibly retesting 0.6000
The current interbank midrate is: NZDUSD 0.5876
The interbank range this week has been: NZDUSD 0.5814- 0.5886
RBA minutes revealed an 8-1 vote in favour of keeping the cash rate unchanged at 4.35% with the board fearful of the prolonged energy driven inflation forecast. The New Zealand Dollar (NZD) bounced back off 0.8165 (1.2250) Monday to post 0.8240 (1.2135) before settling around 0.8215 (1.2170) this morning, shaping up to be the best week in over a year for the kiwi if it can hold these levels. Next week’s RBNZ cash rate shouldn’t pose any mass hysteria with expectations the central bank will hold at 2.25%. Also on the economic docket is Australian CPI y/y which should attract more interest if this prints outside of the 4.5-4.7% range.
The current interbank midrate is: NZDAUD 0.8215 AUDNZD 1.2162
The interbank range this week has been: NZDAUD 0.8165- 0.8240 AUDNZD 1.2135- 1.2246
The New Zealand Dollar (NZD) declined to 0.4350 (2.300) levels through to midweek marking a 2-week low against the British Pound (GBP) before UK CPI was released. The Pound immediately gave back gains on the data with numbers confirming 2.8% to April lower than the 3.0% markets were predicting. The cross posting 2.2840 (0.4380) where it sits this morning. Next week’s RBNZ cash rate announcement will be a hold at 2.25%.
The current interbank midrate is: NZDGBP 0.4373 GBPNZD 2.2867
The interbank range this week has been: NZDGBP 0.4346- 0.4390 GBPNZD 2.2774- 2.3008
Choppy conditions in the Australian Dollar (AUD), US Dollar (USD) cross has seen inconsistent moves this week, the Aussie has come off 0.7080 midweek to trade back around the 0.7160 area as risk markets improved. Australian employment numbers ticked up to 18,600 in April against expectations of 17,500 but the participation dropped from 66.8% to 66.7%. The unemployment rate now sits at 4.5% rising above forecast at 4.3% making the highest number since mid-2021. Chances of the RBA raising rates have certainly risen on this data. A daily close above 0.7160 and we could get further upside moves.
The current interbank midrate is: AUDUSD 0.7151
The interbank range this week has been: AUDUSD 0.7078- 0.7183
The British Pound (GBP) extended moves early in the week from 0.5360 (1.8670) against the Australian Dollar (AUD) to post 0.5290 (1.8910) Tuesday before giving back gains into Friday sessions to 0.5325 (1.8780) levels. UK CPI y/y to April came in lower at 2.8%, significantly down on expectations of 3.0% and March’s 3.3% signalling positive signs of cooling. However, energy costs caused by the Iran war have not yet been included to the numbers. Australian unemployment rose to 4.5% off 4.3% for April showing a sharp decline in domestic data reinforcing the RBA will pause its tightening cycle.
The current interbank midrate is: AUDGBP 0.5322GBPAUD 1.8789
The interbank range this week has been: AUDGBP 0.5288- 0.5373GBPAUD 1.8609- 1.8909
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