•Trump and Netanyahu have agreed to a ceasefire in the Middle East conflict, but part of the agreement was for the strait of Hormuz to be re-opened which Iran has not done as yet. Iran is waiting for a ceasefire in Lebanon first. There is still a lot of work to be done before the strait negotiations confirm the long-term future of the strait, made slightly more complicated with Netanyahu seemingly running his own agenda.
• With a ceasefire underway in the Middle East markets have breathed a sigh of relief with mood shifting positive.
• Trump has requested Netanyahu to reduce bombing in Lebanon to assist with his negotiations in Iran.
• WTI moves to below 100.00 per barrel, settling around 98.00 levels.
• The Fed predicts the 1-year inflation expectation to reach 3.4% vs 3.0% prior.
• US final GDP q/q printed at 0.5% in the fourth quarter of 2025 a touch below estimates of 0.7%.
• The Australian Dollar (AUD) has been the strongest currency in the past 48 hours while the US Dollar (USD) has been the worst performer.
Geopolitical headlines over the past couple of days have dominated market moves with the ceasefire turning sentiment to "risk on." The New Zealand Dollar (NZD) has been feeling better booking 1.5% of travel from earlier weeks 0.5680 to 0.5860 this morning in late NY sessions. US final GDP for the fourth quarter came in at 0.5% down from 0.7% in the third Q reflecting a downward trend in investment and spending. If the cross can close the day above 0.5850, we may see further upside develop.
The current interbank midrate is:NZDUSD 0.5852The interbank range this week has been:NZDUSD 0.5680- 0.5873
The New Zealand Dollar (NZD) has rebounded off the key bear channel support midweek to return to 0.8300 (1.2050) levels boosted by the 2-week ceasefire and the potential reopening of the Hormuz strait. Earlier in the week the RBNZ left the cash rate unchanged at 2.25%, the central bank suggesting events in the Middle East have materially changed the policy outlook. Inflation pressures will depend on how the conflict in the Middle East wraps up. The RBNZ will focus on a return of a 2.0% target (currently 3.1%) and may be forced into a hike late this year. Fundamental analysis still suggests the AUD could remain dominant in the short to medium term.
The current interbank midrate is:NZDAUD 0.8263AUDNZD 1.2093
The interbank range this week has been:NZDAUD 0.8198- 0.8302AUDNZD 1.2045- 1.2197
The New Zealand Dollar (NZD) has staged a sharp reversal over the week against the British Pound (GBP) off 0.4300 (2.3250) levels to grab back earlier losses reaching 0.4365 (2.2920) in morning trade. Except for earlier week benign RBNZ rate news (2.25% unchanged) the cross has predominantly been driven by geopolitical headlines, recently the US/Iran 2-week ceasefire calming markets. Both central banks will be considering inflationary outcomes of higher energy prices to cash rate projections. We expect both the RBNZ and the Bank of England (BoE) to hike towards the end of the year. Historically speaking current levels suggest it's still extremely favourable to sell GBP.
The current interbank midrate is:NZDGBP 0.4359GBPNZD 2.2941
The interbank range this week has been:NZDGBP 0.4301- 0.4368GBPNZD 2.2893- 2.3248
With risk markets supported by the breakthrough in the Middle East including an agreement on a two-week ceasefire and a potential reopening of the Hormuz strait the Australian Dollar (AUD) has gained on the US Dollar (USD) from early week’s 0.6870 to post 0.7080 at the NY close of day. This move reverses the last 3 weeks of struggles by the Aussie. Australia faces inflationary pressures over the near term which complicates the RBA hawkish policy stance. Its possible now the central bank may move to hike as early as May to alleviate higher price moves. This in turn would almost certainly offer the AUD a strong tailwind.
The current interbank midrate is:AUDUSD 0.7079
The interbank range this week has been:AUDUSD 0.6874- 0.7094
As we suggested earlier in the week a retest of the level around 0.5335 (1.8750)- this still looks the probable play ahead with prices still supporting "risk products" such as the AUD based on easing geopolitical tensions. The cross currently trading at 0.5275 (1.8960). The RBA has been hawkish for some time, however with rising inflation forecasts ahead the RBA may need to hike around midyear to 4.35%. The bank of England (BoE) may scale up their rate hike projections for a possible rise later in the year as well.
The current interbank midrate is:AUDGBP 0.5271GBPAUD 1.8971
The interbank range this week has been:AUDGBP 0.5217- 0.5286GBPAUD 1.8915- 1.9166
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