Adrian Orr starts his new job today; President Donald Trump is seeking a one third narrowing of the US Trade Deficit with China; NZD has reversed sharply off its last week’s low of 0.7150 against the USD as it eyes 0.7350

Adrian Orr starts his new job today; President Donald Trump is seeking a one third narrowing of the US Trade Deficit with China; NZD has reversed sharply off its last week’s low of 0.7150 against the USD as it eyes 0.7350

By Neven Fisher*:

The new Reserve Banks governor Adrian Orr starts his new job today. He becomes the 12th governor of the Reserve Bank taking over the Grant Spencer who has been relieving in the role since late last year. Adrian Orr is 54 years old and has will become one of the most influential people in New Zealand with the say over interest rate and loan decisions. He past positions include the head of economics at the RBNZ and over the past 10 years has been Chief Executive of the NZ Super Fund. He comes on board with a reputation of not mincing his words and will call a spade a spade but will be entertaining. His boldness may get him into trouble with financial markets if he comes across blunt, as sensitive as the markets are he could turn the NZ Dollar in a heartbeat. Finance Minister Grant Robertson and Adrian Orr signed a new (PTA) Policy Targets Agreement Thursday outlining specific targets for price stability and employment, this sets out the provisions of the Reserve Bank Act 1989 over his full 5-year term as governor.

President Donald Trump is seeking a one third narrowing of the US Trade Deficit with China. He is looking for a 100B reduction in the US trade deficit, the US had a 337B trade shortfall in goods and services with China last year. We have seen risk appetite return to the markets Monday with most currencies trading higher on the back of positive news with negotiations now taking a cooperative tone.

Big Thursday largely became a fizzer based on a lack of movement across the board. The RBNZ kept rates on hold as was widely expected and the Federal Reserve hiked to 1.75% from 1.5% with the Fed chairman Powell highlighting that policy will need to be tightened further, gradually through 2020 as the economy goes through a growth period of inflation nearing 2.0%. Equity markets closed the week on losses with the DOW and the Nasdaq both down over 2%. The US Dollar Index is lower as well back under 90.00 to 89.48 as markets sought risk currencies. In other news Facebook has 100B wiped off the share value in the last 10 days as Cambridge Analytica answers questions on how 50 Million Facebook users got into their hands to assist Trump win his Presidential campaign. Good Friday holiday will see a shortened week in financial markets with only a few key economic announcements of note.

Major Announcements last week:

  • S and China Trade discussions dominates news headlines
  • ederal Reserve hikes from 1.5% to 1.75%
  • BNZ leaves rates on hold at 1.75%
  • K Retail Sales m/m improves to 0.8% based on 0.4% expectation
  • ustralian Unemployment Rate up 0.1% to 5.6%
  • ank of England leave rates on hold at 0.5% based on 2/7 vote
  • S Durable Good Orders m/m prints at 1.2%

NZD/USD

The New Zealand Dollar (NZD) has reversed sharply off its last week’s low of 0.7150 against the US Dollar bouncing higher on risk appetite to 0.7290. US Talks with China have gone from insulting to productive Tuesday as US Secretary Mnuchin said “we are cautiously hopeful” an agreement can be reached. US Equities have rallied off lows, the DOW up over 2% overnight alone, shaking off the prior day’s hangover. New Zealand Trade Balance figures came out yesterday at 217M also contributing to the surging kiwi Dollar (NZD) , as it eyes 0.7350 the previous high of 13 March.

DIRECT FX Current level Support Resistance Last wk range
NZD/USD 0.7290 0.7150 0.7410 0.7155-0.7303

NZD/AUD (AUD/NZD)

The Australian Dollar (AUD) fall away sharply late Friday and early this week against the New Zealand Dollar (NZD) pushing to a 0.9452 (1.0580) high before reversing back to 0.9430 (1.0600) trading north of its recent range. With a new 5 month low its surprising to see the pair back above 0.9400,but reflecting the current weakness in the Aussie Dollar (AUD). Resistance is now at 0.9650 (1.0360), the Australian Dollar (AUD) now nearly 4% lower that the January high of 0.9030 (1.1070), risk remains to the upside which is fantastic for buyers of AUD

DIRECT FX Current level Support Resistance Last wk range
NZD / AUD 0.9415 0.9048 0.9425 0.9292-0.9446
AUD / NZD 1.0621 1.0610 1.1055 1.0586-1.0763

NZD/GBP (GBP/NZD)

The British Pound made further gains over the New Zealand Dollar (NZD) late last week closing at 0.5120 (1.9540) in an otherwise uneventful end to a busy week. Markets opened Monday with renewed optimism that the United States and China have begin calm negotiations on trade. The pair not really responding in a hurry grinding higher to 0.5133 (1.9480). UK Current Account is published Thursday with expectation of a -23.B slightly worse than Dec 22 figure. This could put pressure on the GBP, especially if risk appetite buys the NZD. We expect a return to 0.5185 (1.9290) 

DIRECT FX Current level Support Resistance Last wk range
NZD / GBP 0.5125 0.5050 0.5285 0.5091-0.5161
GBP / NZD 1.9512 1.8920 1.9800 1.9375-1.9642

 NZD/CAD

The New Zealand Dollar (NZD) continues to make nice gains against the Canadian Dollar (CAD), all said and done we find this rather surprising given the weakness lately in the New Zealand Dollar (NZD) and a Canadian economy slowly gaining momentum. Core CPI and Retail figures late last week were mixed but annual inflation figures are now up over the 2.00% target mark of 2.2% and a rise in the cash rate could be seen as early as April. The NZD/CAD extends its merry way as it has done since 1 December 2017 from the low of 0.8700, and although the CAD made back some ground late last week we still eye further movers higher, long range to 0.9830. Canadian monthly GDP prints Friday.

DIRECT FX Current level Support Resistance Last wk range
NZD / CAD 0.9365 0.9292 0.9510 0.9290-0.9470

NZD/EURO (EURO/NZD)

The EURO (EUR) made small gains over the New Zealand Dollar (NZD). The pair was choppy in volatile markets with plenty of data shifting prices in the pair. Trading off its high of 0.6150 (1.69700), NZ monthly Trade Balance gave the kiwi momentum, showing a surplus of 217M recorded for February. Exports rose 446M, 11% to 4.5B compared to the previous February of 4.2B. These figures were largely inaccurate based on 8,000 cars being turned away from NZ ports after a "stink Bug" infestation. The elusive 0.6000 will need to wait a while longer with strong support amongst buyers for EUR. The near term momentum looks to possibly test 0.5750 (1.7400)

DIRECT FX Current level Support Resistance Last wk range
NZD/EUR 0.5120 0.5737 0.5984 0.5826-0.5890
EUR/NZD 1.9531 1.6710 1.7430 1.6978-1.7163

NZD/YEN

The New Zealand Dollar (NZD) has recovered all of last week’s damage to trade up from the low of 75.50 and push through 77.00 early in the week based on risk appetite. News around the ongoing US and China trade tariffs continues to shift markets and open up investor wallets. We don’t think we will see the pair trading back at 81.50 any time soon this being the yearly high from January but if momentum continues NZD/JPY could trade back to 78.50 resistance again before Easter.

DIRECT FX Current level Support Resistance Last wk range
NZD / YEN 76.98 75.35 79.40 75.56-77.07

AUD/USD

The Australian Dollar (AUD) has lifted versus the US Dollar (USD) coming off the weekly close price of 0.7695 it has risen to 0.7750 in risk on markets. Trade negotiations between China and the US look to have taken a turn for the positive with negotiations about to start, markets saw this as an enormous relief. Sources say the demand for Australian produced Iron Ore has decreased, shipping less to China with numbers being the weakest since February 2016. We expect the Australian Dollar to drift lower once a risk averse market resumes with immediate downside risk at 0.7720 and then 0.7670 with the long-term range being 0.7500. Buyers should consider buying on spikes as we see today.

DIRECT FX Current level Support Resistance Last wk range
AUD / USD 0.7745 0.7670 0.7900 0.7673-0.7782

AUD/GBP (GBP/AUD) 

The Australian Dollar (AUD) continues to weaken off against the British Pound (GBP). Last week the pair dropped through key support of 0.5555 (1.8000) with ease in heavy traded markets and has continued this momentum well into this week posting a new multi year low of 0.5443 (1.8370). UK Current Account is published Thursday with expectation of a -23.B slightly worse than Dec 22 figure. Direction from here should continue to the downside for a while with Brexit still driving the GBP.

DIRECT FX Current level Support Resistance Last wk range
AUD / GBP 0.5445 0.5150 0.5578 0.5422-0.5509
GBP / AUD 1.8365 1.7925 1.9420 1.8151-1.8444

AUD/EURO (EURO/AUD)

The EURO (EUR) is currently testing support at 0.6225 (1.6065), the January 2015 low against the Australian Dollar (AUD). The Aussie (AUD) continues to weaken against a surging EURO (EUR) in a risk on market based on positive trade talks between China and the US. The AUD/EUR may go lower if current support continues, the next support is 0.6150 (1.6250) the February 2016 level. Buyers should consider above 0.6200

DIRECT FX Current level Support Resistance Last wk range
AUD/EUR 0.6220 0.6067 0.6357 0.6200-0.6299
EUR/AUD 1.6077 1.5610 1.6500 1.5875-1.6130

AUD/YEN

The Australian Dollar (AUD has declined against the Japanese Yen (JPY) for the 7th straight week travelling down to a low Monday of 80.60 in risk averse markets. The Aussie has made a small recovery early in the week pushing back to 81.00. Support still lies with the Yen (JPY) with momentum firmly to the downside. This week sees Japanese Core CPI and Unemployment with RBA governor Kent speaking.

DIRECT FX Current level Support Resistance Last wk range
AUD/YEN 81.80 80.50 83.15 80.53-82.41

AUD/CAD

The Canadian Dollar (CAD) has made up ground against the Australian Dollar (AUD) for the second week. Coming off its high of 1.0230 March 14th its trading at the key bullish chanel support of 0.9940 Tuesday, if it breaks lower we may see 0.9880 tested. Canadian monthly GDP prints Friday the only significant release out of Canada, offshore fundamentals will drive this pair with “Good Friday” holiday to close the week.

DIRECT FX Current level Support Resistance Last wk range
AUD / CAD 0.9945 0.9875 1.0220 0.9912-1.0087

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Market commentary:

The new Reserve Banks governor Adrian Orr starts his new job today. He becomes the 12th governor of the Reserve Bank taking over the Grant Spencer who has been relieving in the role since late last year. Adrian Orr is 54 years old and has will become one of the most influential people in New Zealand with the say over interest rate and loan decisions. He past positions include the head of economics at the RBNZ and over the past 10 years has been Chief Executive of the NZ Super Fund. He comes on board with a reputation of not mincing his words and will call a spade a spade but will be entertaining. His boldness may get him into trouble with financial markets if he comes across blunt, as sensitive as the markets are he could turn the NZ Dollar in a heartbeat. Finance Minister Grant Robertson and Adrian Orr signed a new (PTA) Policy Targets Agreement Thursday outlining specific targets for price stability and employment, this sets out the provisions of the Reserve Bank Act 1989 over his full 5-year term as governor.

President Donald Trump is seeking a one third narrowing of the US Trade Deficit with China. He is looking for a 100B reduction in the US trade deficit, the US had a 337B trade shortfall in goods and services with China last year. We have seen risk appetite return to the markets Monday with most currencies trading higher on the back of positive news with negotiations now taking a cooperative tone.

Big Thursday largely became a fizzer based on a lack of movement across the board. The RBNZ kept rates on hold as was widely expected and the Federal Reserve hiked to 1.75% from 1.5% with the Fed chairman Powell highlighting that policy will need to be tightened further, gradually through 2020 as the economy goes through a growth period of inflation nearing 2.0%. Equity markets closed the week on losses with the DOW and the Nasdaq both down over 2%. The US Dollar Index is lower as well back under 90.00 to 89.48 as markets sought risk currencies. In other news Facebook has 100B wiped off the share value in the last 10 days as Cambridge Analytica answers questions on how 50 Million Facebook users got into their hands to assist Trump win his Presidential campaign. Good Friday holiday will see a shortened week in financial markets with only a few key economic announcements of note.

Australia

The Australian Dollar traded sideways between 0.7670 and 0.7770 closing the week at 0.7695 after depreciating over risk off markets. Equities fell away sending the Australian Dollar south as the markets digested the worst week of equities since January 2016. Early this week we have seen risk back on the table with China and the US slowly sorting trade differences, China saying there is no need to hyperventilate, let’s keep level headed around negotiations, which is a weird thing to say after retaliating with their own threats. The Australian Dollar has a quiet week on the economic calendar with nothing of note until New Home Sales figures for March publish on Tuesday with a speech from Governor Kent also Tuesday. Kent is speaking at the Investment Implementation Summit in Sydney where he will talk mainly on monetary policy. Tariffs threats will be the main talking point this week with ongoing negotiations regarding exemptions.

New Zealand

The New Zealand Dollar (NZD) remains in a bullish band on the Monday open. Dropping to 0.7230 Friday after a risk averse market it has bounced higher pushing through to 0.7270 resistance. Monday's early spurt of data- New Zealand Trade Balance and the Reserve Bank of New Zealand (RBNZ) updated ‘Policy Target Agreement” (PTA) has boosted the kiwi. The new governor Adrian Orr takes over the NZ Central Bank today (27th March) for the next 5 years and is reputed to be a colourful character. Tariff talks remain at the peak of discussion pushing the NZD back to 0.7300 Tuesday against the US Dollar (USD) dominating the week’s currency movement with a quite economic calendar with “Good Friday”.

United States

The US Dollar has started the week immediately on the back foot- the US Dollar index falling to 89.42 showing a weakening greenback with fallout over continuing international trade wars. President Trump said he would impose tariffs on 100 Billion worth of Chinese goods. China have retaliated with their own set of rules saying, they would impose tariffs on 128 US products. China said they would retaliate further if a decision could not be reached with the Trump government and that they would also take legal actions with the World Trade Organisation. The threat of a global trade war is still on the cards, if the tariffs were to remain in place we could see a severe downturn in the Chinese economy which could lead to a global recession. Equity indices all took a bath over the news both the DOW and the Nasdaq falling over 2% the biggest falls in over 6 weeks but regained losses Monday and Tuesday when risk came back to the table after the US Government and China are set to start proper negotiations. This week is a short one with Good Friday. CB consumer confidence is Wednesday along with pending home sales Thursday to drive the markets.

Europe

The EURO (EUR) has soured off Wednesday's low of 1.2240 to trade through resistance of 1.2400 in heavy traded markets against the US Dollar (USD) Risk came back on the table once trade negotiations between China and the US were restored. 1.2550 the mid-February high could be tested in the near term if risk continues. Angela Merkel has reported that the cost estimate of 6B- 7B EURO to Germany following the exit of Brexit in March 2019 is a blow- the original estimates were based on 3B- 3.5B EU Budget Commissioner Gunther Oettinger had set in February. The following stage will be intense for EU negotiators with time running out before the deal to be struck before March 2019. Spanish yearly CPI is expected to print positive tonight with expectation of 1.5% significantly better than February's 1.1%. German CPI is Thursday.

United Kingdom

The hawkish Pound (GBP) has pushed aside 1.4000 again on its way to trade at a high of 1.4170. It has opened well Monday and looks to be on a trajectory for the previous early March level of 1.4350. The Bank of England (BoE) have chosen to leave the cash rate unchanged last week but have almost ensured a hike for May. The Pound should continue to strengthen leading into the May monetary release as markets price in the impact to the yield curve with the potential for another hike in November if sentiment gains momentum. The one unknown elephant in the room is Brexit, as officials work out to formalise arrangements any political and economic outcomes should have an impact on the Pound (GBP) with lots of volatility. Assuming an agreement can be reached by the March 2019 deadline we see the GBP going higher to possibly pre-Brexit levels of around 1.4800. UK Current Account publishes Thursday.

Japan

The Japanese Yen (JPY) closed the week at a 4 month low of 104.65 Friday against the US Dollar (USD) in a risk averse market after President Trump slapped tariffs on China Thursday. The USDJPY has posted early gains on Monday and has reversed most of last week’s losses already looking to break above 105.80. Another quiet week on the data front with only Japanese Retail Sales and Unemployment figures to print. With ongoing trade fears between the US and China we may continue to see further weakness in the USDJPY this week as risk appetite gets hammered.

Canada

The Canadian Dollar (CAD) continued to reverse the previous week’s gains falling to 1.2850 against the US Dollar in heavy trading. Coming off 1.2940 in the later stages of last week it has closed around 1.2880. In risk averse markets the Canadian Dollar dropped in value and has not been well supported. Core CPI and Retail Sales printed down on expectation while monthly CPI rose to 0.6% after 0.4% was widely expected. Interestingly after we have mainly reported on the sinking Canadian Dollar of late this pushes Canada’s annual rate of inflation to 2.2% which is above the banks target of 2.%. 1.2800 level offers a hard support line as we look for another break above 1.3000. Odds are that a rise in interest rates could now happen as close as April instead of July.

Daily exchange rates

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USD 
NZD
End of day UTC
Source: CoinDesk

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