NZD: Asia-Pac: NZD/USD Drifts Higher In Sympathy & Lower CNY Fix
The NZD/USD had a range of 0.5722 - 0.5745 in the Asia-Pac session, going into the London open trading around 0.5740, +0.30%. Some clarification from China over the weekend on their new rare earth export controls has seen the US walk back its aggressive stance and a more conciliatory tone is being set. I suspect a lot of Friday's moves will see some decent pullbacks on this, but how long it lasts is anybody's guess. The NZD has drifted higher from the open in sympathy to moves elsewhere and another very low CNY fix from the PBOC which has underpinned the move for now. The NZD had a poor weekly close though and technically remains a sell on rallies now for those looking for a currency to be short of in their basket. The sell zone remains back toward the 0.5800 area with the market looking for a potential move back towards the 0.5500/0.5600 area.
- MNI - Services & Manufacturing Indices Signal Ongoing Weak Q3 Activity. The BNZ services and manufacturing PMIs for September were consistent with the RBNZ’s assessment in its October statement that “economic activity recovered modestly in the September quarter”. Continued weak activity, including employment, at the end of the quarter is consistent with further RBNZ easing with policy likely to become stimulatory.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5850(NZD300m Oct 14), 0.5950(NZD312m Oct 16) - BBG
- AUD/NZD range for the session has been 1.1321 - 1.1373, currently trading around 1.1365. The Cross failed again above the 1.1400 area where I suspect initial paring back of longs. A clear sustained break above 1.15/1.16 resistance and the market will begin to think about levels back towards 1.2000 and above. Dips back toward 1.1200 should be a good place to start buying again if seen.
Fig 1: AUD/NZD Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.550 @ 15:36 BST Sep 12
- SUP 1: 96.430/95.900 - Low Sep 3 / Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are trading off recent lows. A resumption of gains from here would further narrow the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
FED: MNI Fed Preview-September 2025: A Reluctant Return To Easing
We've published our preview of the upcoming FOMC meeting - Download Full Report Here
- The Federal Reserve is set to resume its easing cycle at the September 16-17 meeting with a 25bp cut to the funds rate range to 4.00-4.25%.
- The decision to cut after a 5-meeting pause was well-telegraphed by Chair Powell, whose Jackson Hole speech described a “shifting balance of risks” toward a weaker labor market that “may warrant adjusting our policy stance”.
- The updated quarterly projections aren’t likely to bring many changes to the macroeconomic variables, but as usual the signal sent from the Fed rate “Dot Plot” will garner attention. A Committee split between expecting one or two further cuts this year is likely, keeping each of the remaining meetings of 2025 “live”.
- The Statement will downgrade the description of the labor market to reflect a rise in the unemployment rate and poor payrolls growth, and is likely to include at least one dissent to the rate decision.
- But with a Committee that is fairly divided on the way forward, Powell will be noncommittal on future action, reiterating that policy is not on a preset course, and upcoming decisions will be data-dependent.
- A key undercurrent is an increasingly activist approach to Fed personnel management from the White House, which leaves the composition of the FOMC uncertain not just over the medium-term but also at this meeting.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Sep 15
RATINGS: Fitch: France Cut To A+ From AA, Portugal Up To A From A-
Fitch has downgraded France's sovereign rating to A+ (with stable outlook) from AA-. Release here.
- Among other factors in the decision, Fitch cites "High and Rising Debt Ratio", "Political Fragmentation Hinders Consolidation", "Weak Fiscal Record", "High 2025 Deficit", "Uncertain Fiscal Consolidation Path", and "Fiscal Rigidities".
- In "Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade", Fitch cites "Public Finances: A sustained increase in government debt/GDP over the medium term, due to failure to implement fiscal consolidation measures and/or a persistent increase in financing costs" and "Macro: Materially lower economic growth prospects and weakened competitiveness." Conversely, potentially leading to positive ratings action would be "Public Finances: Confidence that government debt/GDP will be put on a downward trajectory over the medium term, for example, due to fiscal consolidation and/or stronger economic growth".
- Fitch also raised Portugal to A (stable outlook) from A-, while elsewhere, S&P raised Spain to A+ (stable outlook) from A.
- As MNI wrote earlier, we expected France to be downgraded to A+ and Portugal to be upgraded to A.
