Markets have been dominated by the Middle East war and the ensuing energy crises, since March of this year. Markets have been extremely volatile, with ceasefires allowing confidence to return, along with market sentiment, to ebb and flow. Equities and Bond yields have been volatile but remain at near pre-war levels. The real threat to world economies is inflation sparked by a serious energy crisis. The latest resumption of the kinetic war, has been taken calmly by markets, so far. If the war extends and escalates, volatility will return, Markets are coping with the volatile situation much better in recent days, but if oil prices surge back above US$100/barrel, the economic crises will ensue.
The Middle East war exploded once again, over the last week, but markets took it in their collective stride. Oil prices surged back towards US$80/barrel, but bond yields remain subdued, as do equity markets. The markets have brushed off the on-again-off-again nature of the Middle East war, as the ‘boy cried wolf’, one too many times. The RBNZ raised rates at the last recent meeting, lighting a fire under the NZ Dollar, which has only been enhanced with increased market confidence. The KIWI has jumped from 0.5700, to around 0.5850, with more short-term upside in the tank.
The current interbank midrate is:NZDUSD .5841
The interbank range this week has been:NZDUSD .5749 - .5857
The RBNZ decision to increase rates at the last meeting was enough to trip the NZD/AUD out of their previous settled trading range. The NZD/AUD cross-rate was trading calmly around 0.8200, but has since surged towards .8350. There is increased confidence in markets, as improvements in recent NZ economic data, has added to the currencies upward momentum.
The current interbank midrate is: NZDAUD .8343 AUDNZD 1.1986
The interbank range this week has been: NZDAUD .8288 - .8366 AUDNZD 1.1951 - 1.2064
The KIWI’s strong performance over the past week has pushed NZD/GBP towards 0.4350, supported by improving New Zealand sentiment and a more resilient domestic outlook. The cross has also benefited from softer GBP sentiment, with the UK’s transition to a new Prime Minister adding another layer of uncertainty for the Pound. While a leadership change may provide a short-term boost to confidence, markets will remain focused on the UK’s economic challenges and the Bank of England’s rate outlook. The RBNZ policy path and any shifts in interest rate expectations will remain key drivers for the next move in NZD/GBP.
The current interbank midrate is:NZDGBP .4334 GBPNZD 2.3073
The interbank range this week has been:NZDGBP .4298 - .4346 GBPNZD 2.3010 - 2.3261
The robust performance of the NZ Dollar, over the last week or so, has also led to the cross-rate with the EUR jumping out of recent steady trading ranges. The NZD/EUR has been holding around the 0.5000 mark, for some time, but the recent surge has popped the cross-rate back above 0.5100. This is likely to continue, unless a ‘resurgent energy crises’ upturns the ship.
The current interbank midrate is:NZDEUR .5103 EURNZD 1.9596
The interbank range this week has been:NZDEUR .5046 - .5110 EURNZD 1.9561 - 1.9817
The resurgent Middle East war has not yet spawned another new energy crises. Markets remain remarkably calm, in both bonds and equities. Oil has spiked back towards US$80/barrel and an extended resumption of the war, may see the re-emergence of the energy crises. Until or unless this happens, the AUD has reclaimed some mojo, close to regaining the ‘Big Figure’ of 0.7000. Upward momentum may continue unless Geo-Political crises intervenes.
The current interbank midrate is:AUDUSD .6996
The interbank range this week has been:AUDUSD .6916 - .7014
The AUD/GBP cross-rate has remained relatively steady over the past week, trading between 0.5150 and just above 0.5200. The GBP could come under the spotlight in the coming week as the UK transitions to a new Prime Minister. While any leadership change may provide a short-term boost to sentiment, ongoing concerns around UK growth, fiscal pressures and the broader economic outlook continue to weigh on the Pound. Focus will remain on economic data and Bank of England policy expectations as key drivers for GBP direction.
The current interbank midrate is:AUDGBP .5192
The interbank range this week has been:AUDGBP .5169 - .5217GBPAUD 1.9166 - 1.9346
The AUD has regained some ground, over the last week, pushing the cross-rate from trading around 0.6000, to jumping above 0.6100. The ECB meet to decide interest rates, again this week, following a raise in rates by 25 basis points in June. If the Middle East crises ‘morph’s’ into another energy crises, they may well raise rates again this week. This will put the EUR into a vulnerable space, this coming week, with important fundamental vulnerabilities.
The current interbank midrate is:AUDEUR .6113 EURAUD 1.6359
The interbank range this week has been:AUDEUR .6070 - .6122 EURAUD 1.6335 - 1.6473
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