GBP Forecasted Higher v Australian Dollar but NZ Dollar to Find Support

The Australian dollar (AUD) and New Zealand dollar (NZD) remain under pressure against the pound sterling (GBP) as we head through February 2015.

The AUD was hit hard by the decision at the Reserve Bank of Australia to cut interest rates in the face of low inflation and a slowing global economy.

Also under pressure is the New Zealand dollar which continues to trade under the shadow of an increasingly jittery RBNZ which has indicated it no longer seeks to raise interest rates in 2015.

The RBNZ has form in this regard having caused problems for the NZD in the latter part of 2014 having intervened directly in the currency markets to supress NZD valuations.

Where are the Australian and New Zealand Dollars Right Now?

At the time of this article's last update the Australian to US dollar exchange rate converts as follows 1 AUD = 0.7825 USD.

The pound to Australian dollar exchange rate, 1 GBP conversion = 1.9436 AUD.

The New Zealand to US dollar exchange rate, 1 NZD conversion = 0.7428 NZD.

The pound to New Zealand dollar exchange rate, 1 GBP conversion = 2.0507 NZD.

Are you holding out for a better exchange rate? Ensure your FX provider has the correct buy order ready, also ensure a stop-loss order is in place incase the market turns against you and costs you, learn more here. Also note that an independent provider will seek to deliver up to 5% more currency than your bank does.

AUD: Lowered Forecasts in February 2015

As we move through Feb 2015 analyst Raiko Shareef at BNZ confirms his research has prompted a cut to Aussie FX forecasts:

• With our NAB colleagues, we have lowered our near-term AUD forecasts across the board.
• Our previous forecasts were hit well before time, as poor liquidity and high volatility exacerbated AUD’s decline in the run-up to the RBA’s February meeting.
• In light of that rate cut, NAB’s expectation of another in 2015, and a poor terms of trade outlook, we now pick AUD to hit 0.74 at end-2015 (0.78 previously).
• As a result, our NZD/AUD track is marked higher, with 0.95 picked for year-end pick (prev. 0.90).
• We see the cross trading a wide range around the mid-0.90’s, but remain extremely sceptical that parity will be hit.

NZD: Still Bearish, But No Basket Case

BNZ Research summarise the following on NZD:

• The RBNZ surprised by shifting abruptly to a neutral bias, sparking speculation of imminent rate cuts.
• Governor Wheeler poured cold water over the ratecut camp. The RBNZ sees "a period of OCR stability".
• With NZ activity data still robust, this approach should see NZD shed underperformer status.
• We still pick NZD/USD at 0.70 at end-2015, but now see NZD/AUD at 0.95 (prev. 0.90) on AUD weakness.

RBNZ Intervention in the Markets

(From October 2014): The scale of this week's RBNZ intervention was notable points out Boris Schlossberg at BK Asset Management:

"The figure was above the 500M threshold considered to be significant by the market and therefore had an immediate negative impact on the NZD/USD exchange rate which slid to a low of 7706 in Asian session trade before rebounding slightly in European dealing.

"The kiwi received a further shove lower from the comments of NZ PM John Key ( a former Fx trader himself) who noted that the currency's fair value is somewhere around the 6500 level or more than 1200 point lower than current prices."

Schlossberg notes that the fact that RBNZ actually committed capital to formal intervention shows the seriousness of New Zealand authorities in depreciating the value of the currency.

"The kiwi is therefore likely to remain under heavy selling pressure as markets will fear further intervention actions by the central bank. However, the unit which now almost in a free fall has become grossly oversold," warns Schlossberg.

We would agree that the currency is overdue a corrective bounce in the near-term. Beware, these bounces can be sharp in nature and caution is urged when entering this market.

Outlook for the Australian Dollar Negative But Buyers Could Step in at These Levels

According to foreign exchange forecasters at Credit Suisse the outlook for the Aussie dollar is firmly in negative territory at the current time:

"We remain bearish for our core bear target at .8674/58.

"AUDUSD’s break below the 78.6% retracement of the January/July rally at .8839/31 has ignited further selling interest, for a move lower below price support at .8730 next.

"Beneath should then see a retest of our .8674/58 target – the January lows and long-term 38.2% retracement support from the 2001/2011 rally.

"We would expect fresh buyers here. A direct overshoot of the latter can warn of a more serious downtrend towards .8546 next – the 50% retracement of the 2008/2011 uptrend – then .8316."