Market Update 13/05/2024

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The NZD consolidated above 0.6000 during the overnight session on Friday, which is considered a relatively strong position compared to previous levels. Despite some fluctuations, the NZD has shown resilience, having risen by one cent since the beginning of May. Importers should watch this level as selling pressure may anticipate around 0.6030-0.6040 in the upcoming week. However, there is a notable gap before reaching its support level of 0.5980 which was the April low and if it doesn’t hold at this ideal support level then it could go closer to 0.5900 cent mark. If today’s data on inflation meets the expectations or falls short of expectations, markets might interpret positively. But if data continues to align with RBNZ’s expectations, the NZD might face challenges ahead.
 
On NZDAUD, there’s a noticeable downward trend, particularly with a 2% drop in March alone. This decline was mainly attributed to New Zealand’s weaker economic data compared to Australia’s, but this doesn’t mean RBNZ will act impulsively. Although inflation is still present, the RBNZ faces a challenging task and is likely to rely on economic indicators. Various factors attempt to explain why Australia is outperforming, including its proximity to global supply chains, higher population density providing stronger bargaining power against imported inflation, desirable exports, and proficiency in producing hard commodities. Some argue that Australia’s substantial pension savings act as buffer against economic fluctuations. This topic arises frequently, especially as local KiwiSaver funds argue for mandatory pension savings. Nonetheless, NZDAUD may encounter resistance around 0.9130 this week with short-term support at 0.9100 cents and previous lows around 0.9070. Everyone’s closely monitoring interest rates, so any surprises from Australian labour data on Thursday might affect the currency pair.
 
Keeping an eye on USDJPY as there were no intervention last week, and the currency pair bounced back from around 152.00 to approximately 156.00, and the previous highs were around 160.00.
 
NZDEUR failed to surpass their respective 200-day moving average at 0.5600. It’s still a good time to consider exchanging NZD into EUR for Europe trip. NZDGBP experience the similar situation, failed to surpass the 200-day moving average at 0.4820. In the UK, the technical recession has ended with Q1 GDP rising by 0.6% q/q, rebounding from 0.3% decline in Q4. This marks the end of technical recession the UK faced in the H2. Despite the positive GDP growth, it’s noted that this data alone won’t deter the Bank of England (BoE) from potentially cutting interest rates. The decision will likely depend on additional factors such as service sector inflation and wage growth data.
 
This week, the primary market attention will on the release of the US Consumer Price Index (CPI), scheduled for early hours on Thursday morning NZT. Additionally, there are plenty of Federal Reserve speakers lined up throughout the week. On the local front, Australia’s labour data will be out on Thursday, followed by New Zealand’s Producer Price Index (PPI) data on Friday.
 Here are the latest mid-market rates:

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