NZ and Canada central banks shift outlooks

Last week saw the US Dollar slowly but surely grind its way higher against all its Rivals. At the close of New York trade on Friday (Saturday morning, Sydney), the Dollar Index (USD/DXY), a favoured gauge of the Greenback’s value against a basket of 6 major currencies settled at 95.70 against last week’s close of 95.10.

The catalyst was a rise in the US June Consumer Price Inflation to 0.9% from a previous 0.6%, beating analyst’s expectations of 0.4%. US Treasury bond yields ended lower. The benchmark US 10-year bond yield closed at 1.29% on Friday, against 1.36% last week.

The week also saw interest rate decisions from the Reserve Bank of New Zealand and the Bank of Canada. The RBNZ announced it was ending its bond buying program effective 23 July and signalled a shift toward a rate rise. Which was unexpected and saw a big move in the NZD/USD and NZD/AUD.

NZD to AUD at 0.9459 has risen 1.6% above its 90-day average, range 0.9231-0.9459.NZD/AUD

 
In contrast the BOC, as was widely anticipated, reduced the target of its weekly bond purchase, and left its interest rate unchanged. The US Dollar eased off its highs after Fed Chair Jerome Powell stressed that monetary policy would continue to offer powerful support to the economy.

Infections of a third wave of the contagious Covid-19 Delta variant continued to climb around the globe. Which led to haven-support for the US Dollar.

Rate Trends Last Week

USD/JPY – had a choppy trading week, hitting a peak at 110.70 as well as a low at 109.71. The Greenback closed on Friday at 110.08, surprisingly little changed from last week’s close of 110.12. Risk appetite was the main driver of this currency pair. Breaking with tradition the USD/JPY traded independently from the US 10-year bond yield this past week.

EUR/USD – The Euro, in contrast with the Japanese Yen, had a more subdued trading week. The shared currency finished the week lower, settling at 1.1805 (1.1877 last Friday). Overall range for the Euro was between 1.1772 and 1.1881. There were no major Eurozone events or data last week. The EUR/USD was a function of the US Dollar.

AUD/USD – The Australian Dollar finished lower against the Greenback and had some volatile sessions during the week. The AUD/USD pair slid to close lower on Friday at 0.7399 (0.7492 last Friday). Weekly range for the Aussie Battler was 0.7386 (low) and 0.7496 (high). A rise in the delta variant of Covid 19 cases in both Sydney and Melbourne saw both cities locked down, affecting 10 million people.

GBP/USD – Sterling got pounded hard against the US Dollar due to mostly weaker economic data released last week. The UK’s Production Price Index (PPI) for both Input and Output fell and missed estimates. The overall stronger US Dollar also weighed on the British currency. GBP/USD slumped over 1% to close at 1.3765 from its 1.3902 finish last week. Weekly low/high was 1.3738-1.3910.

USD/CAD – Another victim of broad-based US Dollar strength was Canada’s Loonie. The Greenback soared to a 1.2615 finish on Friday, from 1.2445 a week ago. While the Bank of Canada reduced the target of its weekly bond purchases, this was widely anticipated by markets. USD/CAD hit a weekly low at 1.2424 and a high of 1.2620.

NZD/USD – The Kiwi, which is a flightless bird endemic to New Zealand, also the FX market’s name given to the NZD/USD pair, had a roller coaster week. The RBNZ surprised markets mid-week when it announced it would end its bond buying program on 23 July and signalled a shift toward a rate rise. This saw the Kiwi soar to a weekly high at 0.7044 after hitting a low of 0.6939 on the day of the RBNZ announcement. NZD/USD closed at 0.6983 on Friday (0.7002 last Friday).

USD/CHF – finished the week at 0.9178, higher than last week’s close at 0.9140. The Dollar hit a weekly high at 0.9200 against the Swiss Franc on Wednesday. Weekly low for USD/CHF was 0.9117 which was hit on Friday. The Swiss Franc, like all the major currencies, was weaker due to broad-based US Dollar strength.

USD/SGD – against the Singapore Dollar, the Greenback grinded its way higher to finish at 1.3575 on Friday (1.3510 last Friday). The USD/SGD pair hit its weekly high at 1.3578 on the same day. Weekly low for the USD/SGD pair was at 1.3493. The Greenback also gained ground versus all of the Asian, Emerging Market and Asian currencies last week.

USD/THB – The US Dollar hit a one week high at 32.70 which was last seen in mid-April. The USD/THB pair closed at 32.67 on Friday, up from 32.52 last week. Weekly low for the Greenback against the Thai Baht was 32.39. Thailand’s Covid-19 infections have been rising, with the past two days above 10,000 people per day.

USD/PHP – the Philippine Peso weakened against the broad-based, overall stronger US Dollar. Philippine Vice-President Leni Robredo made an urgent plea for vaccinations to speed up amidst a rise of the delta strain of coronavirus cases. USD/PHP finished the week at 50.55, against last week’s 50.25. Weekly high traded was 50.69 while the recorded low was 50.07. Both extremes were hit in choppy trade on Wednesday.

EUR/JPY – The EUR/JPY cross settled at 129.97 in late New York trade on Friday. A week ago, the Euro closed at 130.80 Japanese Yen. EUR/JPY weekly range was between 129.61 (Thursday) and 131.09 (Wednesday). Movements in USD/JPY were the drivers of this cross.

EUR/GBP – closed on Friday in New York at 0.8577 (0.8545 close a week ago). EUR/GBP hit a weekly peak at 0.8597 which was a week ago. Weekly low traded was at 0.8503 on Thursday following the release of weaker-than-expected UK PPI Input and Output data. EUR/GBP steadily climbed to its 0.8577 finish on Friday.

GBP/JPY – Against the Yen, Sterling finished the week at 151.60, lower than its 153.12 close last Friday. The GBP/JPY cross saw a weekly high at 153.48 (Wednesday). The recorded low for the GBP/JPY cross was seen on Friday, at 151.60, which followed the release of weaker than expected UK PPI numbers on Thursday.

AUD/JPY – closed the week lower weighed by the fall in the AUD/USD pair. The Aussie Battler closed at 81.42 on Friday, from its 82.50 close a week ago. Weekly high traded was 82.82 (Wednesday) while the week’s low was at 81.10 which was hit on Friday. Chinese data released last week mostly beat forecasts. It was the struggle to contain rising Covid-19 cases in Sydney and Melbourne that weighed on the Aussie.

EUR/AUD – The Euro gained versus the Aussie last week, finishing at 1.5960 from 1.5852 last week. Weekly high for this cross-currency pair was at 1.5975, which was hit last Friday. The recorded low occurred on Thursday which was at 1.5775.

GBP/AUD – settled at 1.8612 on Friday at the end of trade in New York. Last week’s GBP/AUD New York close was at 1.8560. Weekly high traded was at 1.8651 (Friday) while the low was seen a week ago at 1.8471.

AUD/NZD – the Aussie finished lower at 1.0562 on Friday from 1.0704 at last Friday’s close. AUD/NZD hit a weekly peak at 1.0740 on Wednesday before sliding for the rest of the week. The Australian Dollar hit a low against the Kiwi at 1.0546 (Friday). A hawkish bent from the RBNZ contrasted with the dovish leaning RBZ which weighed on the AUD/NZD pair.