Markets have been dominated by the Middle East war, which escalates and extends. There is talk of behind-the-scenes negotiations, but the fierce exchange in missiles and bombs, remains a daily occurrence. The war threatens to develop into a full-scale global energy crisis, which will hit those without energy independence and low reserves, particularly hard. Europe, Australia and New Zealand are definitely extremely vulnerable, as their dependence on imported energy remains an existential problem. This coming week will offer great insight from Central Banks, led by the Federal Reserve, followed by the Bank of England and Japan.
The New Zealand latest inflation rate spiked from 3.1% to 4.1%, confirming the RBNZ worst fears. The RBNZ raised rates at their last meeting, in anticipation of a spike in inflation, but this was even higher than they had expected. The huge spike is exaggerated by the fact that NZ is one of the few Countries to release only quarterly data, instead of monthly, as most Countries do. It is a major concern and if the Middle East war continues to escalate, expect further upward pressure. The Middle East war could well lead to a global energy crisis, which will drive inflation and interest rate rises. The NZD had traded strongly following the last rate rise, but has since slumped back to 0.5750, following events in the Middle East.
The current interbank midrate is: NZDUSD .5773
The interbank range this week has been: NZDUSD .5768 - .5865
The NZD/AUD cross-rate had jumped into a new trading range and pushed towards 0.8400, but the recent escalation from the Middle East, has tempered the KIWI, allowing the cross to head back below 0.8300. NZ inflation spiked for Q2, jumping to 4.1%, adding pressure on the RBNZ to raise rates even further.
The current interbank midrate is: NZDAUD .8283 AUDNZD 1.2071
The interbank range this week has been: NZDAUD .8274 - .8376 AUDNZD 1.1938 - 1.2083
The NZD/EUR cross rate has traded in a tight range, between 0.5100 and 0.5150, despite some big moves from the KIWI. The EUR has moved in relative tandem, as the US Dollar, remains the key driver. Expect the tight range to continue, but another rate rise from either Central Banks could throw the tight range out the door.
The current interbank midrate is: NZDEUR .5074 EURNZD 1.9705
The interbank range this week has been: NZDEUR .5071 - .5139 EURNZD 1.9457 - 1.9719
The AUD has slumped to 0.6970, over the last week, and remains extremely vulnerable. The Middle East war is escalating and extending, which could easily spiral into a full-blown global energy crisis, which will impact energy dependent Countries. Australia remains energy dependent, despite the wealth of resources, as consecutive Governments have removed their domestic generating capacity.
The current interbank midrate is: AUDUSD .6970
The interbank range this week has been: AUDUSD .6966 - .7024
The new UK PM Burnham has announced a predictable Cabinet, keeping most of the failures from the previous dreadful administration, jut switching roles. This administration promises little and markets are watching closely. UK 10-Year Gilts have spiked above 5%, and further rises, could spell big problems. The cross-rate has traded between 0.5180 and 0.5240, but there is room for downside in the GBP and gains in the cross.
The current interbank midrate is: AUDGBP .5233 GBPAUD 1.9103
The interbank range this week has been: AUDGBP .5181 - .5242 GBPAUD 1.9076 - 1.9295
The last June rate rise from the ECB, was not repeated in this week’s meeting, as the Central Bank hold fire on rate rises, until there is more certainty in the Middle East. The war appears to be extending and this could well develop into a full-blown energy crisis. Europe is extremely vulnerable to any crisis, as gas storage levels remain at near 15-year lows.
The current interbank midrate is: AUDEUR .6124 EURAUD 1.6328
The interbank range this week has been: AUDEUR .6096 - .6149 EURAUD 1.6262 - 1.6403
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