• Markets turned “risk on” early this morning after headline news suggested US President Trump has announced a deal with Iran. Gold rallied along with the NZD, AUD as Oil dropped. The deal has been crucially confirmed by Israel’s N12 which suggests a broader deal includes Lebanon. The deal would extend the ceasefire and re-open the Strait of Hormuz together with around 2 months of negotiations on Iran’s nuclear program.
• Yesterday Iran fired more missiles at Jordan, Kuwait and Bahrain as the Middle East conflict widened. Multiple Gulf States are now actively defending positions raising the risk of further escalation of energy logistics.
• The Bank of Canada (BoC) have left their cash rate unchanged at 2.25% this week the 6th straight leave as Governor Macklem says core inflation has ticked down. He also said the economy is clearly not in a recession but weak.
• The European Central Bank (ECB) has hiked interest rates from 2.15% to 2.4% as widely predicted in order to fight off rising inflation, the ECB is the first central bank to raise rates in direct response to the Iran war.
• The US Dollar (USD) as the strongest performer this week on the main board while the Japanese Yen (JPY) was the worst performer- 5 weeks straight.
The New Zealand Dollar (NZD) dropped to an 8-week low of 0.5770 against the US Dollar (USD) over the week before recovering losses in late NY sessions Friday to push back trade to 0.5840. Trump headlines confirming he was cancelling strikes on Iran as discussions were positive around ending the Middle East war. A peace settlement of sorts has been agreed which could see the re-opening of the Strait of Hormuz along with further nuclear negotiations in the coming weeks. This could give room for a squeeze back to the 100- day Moving average at 0.5900 in the coming sessions.
The current interbank midrate is:NZDUSD 0.5828
The interbank range this week has been:NZDUSD 0.5768- 0.5847
The New Zealand Dollar (NZD) has pushed higher this week against the Australian Dollar (AUD) bouncing off the trendline at 0.8265 (1.2100) along the way to post 0.8290 (1.2065) in early Friday. With absolutely no data releasing this week on the economic docket the focus has been on geopolitical headlines and tensions in the Middle East. The RBNZ remains slightly more hawkish over rate hikes than the RBA with prices this week reflecting. Next week’s RBA will be a hold at 4.35% ahead of NZ GDP q/q due to print at 0.4% ending March up from 4th quarter’s 0.2%. We think prices may retest areas around 0.8345 (1.1985) next week.
The current interbank midrate is:NZDAUD 0.8269 AUDNZD 1.2084
The interbank range this week has been:NZDAUD 0.8221- 0.8297 AUDNZD 1.2052- 1.2163
The New Zealand Dollar (NZD) has posted a 7-week low against the British Pound (GBP) late Thursday of 0.4325 (2.3120) before a sharp reversal higher early this morning saw price return to 0.4355 (2.2960). President Trump has cancelled strikes on Iran citing talks to end the war. Negotiations will take place over the next couple of months to not only close the Strait of Hormuz but to also resolve Itan’s nuclear capabilities. Both central banks remain cautiously hawkish on policy, but this overnight news will most definitely reduce the need to be aggressive. On the chart the NZD looks a little oversold, so we favour a return to 0.4370 (2.2880)
The current interbank midrate is: NZDGBP 0.4343GBPNZD 2.3025
The interbank range this week has been: NZDGBP 0.4324- 0.4373GBPNZD 2.2865- 2.3123
Risk conditions over the week saw the Australian Dollar (AUD) drop to fresh lows around 0.6980 against the US Dollar (USD) reaching 9-week lows as geopolitical headlines dominated poor market mood sentiment. Around 6am this morning the AUD has received all losses climbing off 0.6990 to post 0.7050 on the news Trump and Iran had agreed on a peace deal. Earlier in the week the greenback took support from easing inflation pressures prompting markets to re-price expectations of Fed tightening. However, a less than hawkish RBA has also contributed to earlier losses. Next week’s RBA is our key data release with no hike from 4.35% predicted.
The current interbank midrate is:AUDUSD 0.7047
The interbank range this week has been:AUDUSD 0.6978- 0.7078
The British Pound (GBP) extended its run into Friday to 0.5230 (1.9120) against the Australian Dollar (AUD) in predominantly a risk off tone and less than hawkish RBA. While the RBA is predicted to hold rates at 4.35% next week the Bank of England (BoE) are still excepting to raise rates later in the year. No data releasing over the week along with an Australian Holiday Monday has meant the cross has continued its bear theme. Early this morning media reported a peace deal between the US and Iran which has taken price from 0.5230 (1.9120) to 0.5260 (1.9010)
The current interbank midrate is:AUDGBP 0.5250 GBPAUD 1.9047
The interbank range this week has been:AUDGBP 0.5226- 0.5298 GBPAUD 1.8872- 1.9132
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