• The market implied probability of the RBNZ cutting rates this week on Wednesday when the central bank meet is 97%. 28 of 30 economists expect the RBNZ to cut the cash rate to 3.00%.
• Both the New Zealand Dollar (NZD) and Australian Dollar (AUD) have started the week well rising off the open due to dovish sentiment towards the Fed outlook. Recent data has strengthened the case for the Federal Reserve to cut rates next month on September 18th.
• The meeting between President Trump and Russian leader Putin yielded no clear signs of an agreement to end the war in Ukraine.
• The NZ Dollar may attract buyers leading into the RBNZ meeting as the overwhelming dovish tone towards future Fed moves weakens the greenback.
• UK House Price Index rose from 0.1% to 0.3% in August.
• UK CPI y/y is predicted to rise from 3.6% to 3.7%.
• The British Pound (GBP) was the best performing currency last week with the New Zealand Dollar (NZD) the worst performer on the main board.
The New Zealand Dollar (NZD) tried to make a play higher off the open Monday reaching 0.5940 against the US Dollar (USD) but failed to hold this area. Attention in the cross has turned to tomorrow’s RBNZ outcome and a dovish Fed. The RBNZ will cut rates tomorrow to 3.0% with a small chance of a 50-point cut to 2.75% - we think the economy needs a 50-point reduction to the easing policy but looks slim. Ukrainian President Zelensky and European leaders visited the Whitehouse overnight to discuss security guarantees with Zelensky saying they had “very good talks.” We expect the NZD to soften towards 0.5850 into tomorrow’s RBNZ meet at 2pm.
Current Level: 0.5915
Support: 0.5890
Resistance: 0.6000
Last week's range: 0.5906 - 0.5993
The New Zealand Dollar (NZD), Australian Dollar (AUD) remains choppy around the 0.9130 (1.0950) area with no real direction in sight. It’s a thin docket this week with just the RBNZ cash rate announcement and policy statement tomorrow. The RBNZ is widely expected to cut from 3.25% to 3.00%. We are hoping the central bank may offer a steer on where to next in the cross, we dare say with the RBA stubborn to drop rates in their “gradual” cutting cycle we may see prices retest the 0.9090 (1.1000) level last seen back in early April.
Current Level: 0.9111
Support: 0.9090
Resistance: 0.9175
Last week's range: 0.9095 - 0.9145
Current Level: 1.0967
Support: 1.0900
Resistance: 1.1000
Last week's range: 1.0934 - 1.0994
The RBNZ meet tomorrow at 2pm and will shift interest rates from 3.25% to 3.0% in a bid to throw more support at the poor performing NZ economy and get cash moving. Most of any moves in the New Zealand Dollar (NZD), British Pound (GBP) cross has already been priced into the curve, however we predict a retest of the 0.4365 (2.2910) area post release. Also on the calendar is UK CPI y/y which is expected to tick up from 3.6% in June to 3.7% in July. If this happens we may hear fresh rhetoric around the BoE shifting off their wait and see policy approach to a more aggressive easing plan.
Current Level: 0.4380
Support: 0.4350
Resistance: 0.4410
Last week's range: 0.4364 - 0.4435
Current Level: 2.2830
Support: 2.2680
Resistance: 2.3000
Last week's range: 2.2545 - 2.2910
Ukraine has offered a 100B weapons deal to Trump to win security guarantees. This would be financed by Europe to ensure a peace settlement with Russia. It’s hard to know how this will affect the NZD/EUR, currently we are trading around the 0.5080 (1.9680) zone early Tuesday. It’s said the ECB will hold interest rates steady when they meet in September in contrast to the RBNZ which will cut tomorrow to 3.0% from 3.25%.
Current Level: 0.5071
Support: 0.5040
Resistance: 0.5100
Last week's range: 0.5061 - 0.5121
Current Level: 1.9719
Support: 1.9600
Resistance: 1.9840
Last week's range: 1.9526 - 1.9758
A strong Australian Labor market should ensure the Reserve Bank of Australia (RBA) remains cautious around cutting interest rates aggressively. The 4 main Australian Banks all predicting the cash rate to bottom out at 3.35% by the end of this year. Moves will also be drawn by incoming inflation and targets remaining within 2-3%. In contrast we expect a more aggressive Fed in the coming months which could bring about central bank convergence and a higher AUD/USD. Meanwhile the greenback strengthened off yesterday’s 0.6525 dropping the cross to 0.6490 in morning trade.
Current Level: 0.6490
Support: 0.6420
Resistance: 0.6600
Last week's range: 0.6481 - 0.6568
The Australian Dollar (AUD), British Pound (GBP) broke lower Monday off 0.4800 (2.0850) the 5-week low. UK inflation prints tomorrow on the economic calendar with expectations of 3.7% y/y in July. Markets will be watching this closely after a 3.6% release in June, weary of ongoing price pressures. The Bank of England (BoE) has been adamant the recent jump is short term, at 3.7% they will be forced to show their hand and vote more in favour of cutting sooner over later. We think price could retrace to resistance at 0.4885 (2.0470) this week.
Current Level: 0.4805
Support: 0.4760
Resistance: 0.4855
Last week's range: 0.4793 - 0.4856
Current Level: 2.0811
Support: 2.0600
Resistance: 2.1000
Last week's range: 2.0590 - 2.0863
Geopolitical developments will shape the Australian Dollar (AUD), Euro (EUR) cross over the following days. President Zelensky and Ukraine have promised to buy 100B worth of US made weapons which will be financed by European countries in a bid for security and a peace settlement with Russia. Zelinsky has said he had “very good talks” with President Trump in the Whitehouse overnight. We near the long term daily low at 0.5540 (1.8050), a breach of this level could signal further downside for the AUD.
Current Level: 0.5562
Support: 0.5540
Resistance: 0.5650
Last week's range: 0.5563 - 0.58614
Current Level: 1.7979
Support: 1.7700
Resistance: 1.8050
Last week's range: 1.7810 - 1.7976
