USD Continues to Feel Pressure

  • Worldwide coronavirus cases surpass 107.2 million with over 2,345,000 official deaths.
  • US Equity markets continued to register record levels over the past week.
  • While the market awaits the passage of the $1.9 Trillion US bailout bill, Treasury secretary Yellen says the US could hit full employment next year if the stimulus bill is passed, potentially suggesting interest rates could rise sooner than expected.
  • US Non-Farm Payrolls rose less than expected at +49k, but the unemployment rate fell to 6.3% from 6.7% on the back of a decline in the participation rate. 
  • New Zealand Q1 inflation expectations jumped to 1.89% from 1.59% prior. 
  • The Bank of England leaves interest rates unchanged at 0.10% and maintained its QE program at current levels.
  • UK like for like retail sales +7.1% y/y bs +4.8% prior.
  • Canadian employment change comes in much worse than expected at -212.8k, but much of the decline was as a result of Covid restrictions put in place late last year in Quebec and Ontario. 

NZ Jobs Data Rallies the Kiwi

Market Overview

  • Worldwide coronavirus cases surpass 104.3 million with over 2,261,000 official deaths.
  • US Equity markets continue to register record levels with the DOW and Nasdaq both up over 1.5% overnight.
  • The US Senate has voted in favour of moving ahead with his 1.9T coronavirus relief stimulus plan.
  • The RBNZ are no longer interested in cutting rates this year after a bumper unemployment read of 4.9% unemployment earlier today.
  • The Reserve Bank of Australia have raised their bond buying program by 100B but made comment the Australian economy is well underway to recovering earlier than predicted.
  • AstraZeneca vaccines are showing an 82.4% efficacy rate after a 3 month gap between jabs.
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Howard Wilcox

Choppy Markets This Week

Markets have been choppy this week buffeted by the ongoing Covid pandemic and slow vaccination rates in Europe with the realisation that a return to “normal” is further off than first anticipated. The new Biden administration continues to settle in with little sign of any bipartisan Democratic/Republican cooperation apparent- looks like “normal” transmission has resumed!

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NZD Holds Recent Gains

Market Overview

Key Points:

• Worldwide coronavirus cases surpass 100.2 million with over 2,147,000 official deaths.
• The first NZ community spread coronavirus case in over 2 months has been picked up in a quarantine facility- the highly infectious South African strain, the women twice had negative results before being released from quarantine on the 13th January.
• US Equity markets continue to register record levels.
• US Senate formally voted in the ne US Treasury Secretary Janet Yellen- the first woman to ever hold the job.
• Moderna says expect the first series of vaccines to last around a year before a 3rd booster shot is required.
• Biden says he will use US taxpayers’ funds to rebuild America
• Ex-president Trump’s impeachment trial will begin on the 8th February.
• The AstraZeneca rollout of the coronavirus vaccine in Europe has been a disaster according to analysts as they won’t be able to provide the number of doses originally expected with a drop of around 60% over the first 3 months of 2021 stemming from production issues.

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Economic Releases

Monday 25/01
9.45pm, EUR, ECB President Lagarde Speaks

Tuesday 26/01
5.15am, EUR, ECB President Lagarde Speaks

Wednesday 27/01
4am, USD, CB Consumer Confidence
Forecast 88.9
Previous 88.6
1.30pm, AUD, CPI q/q
Forecast 0.7%
Previous 1.6%
1.30pm, AUD, Trimmed Mean CPI q/q
Forecast 0.4%
Previous 0.4%

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Direct FX

USD Weakness

Worldwide coronavirus cases surpass 97.4 million with over 2,087,000 official deaths.

Currency markets have been relatively subdued over the past week with the broad theme of USD weakness still very much in play. US equity markets remain well supported with the S&P 500 trading to an all-time high in recent days. Markets are keen to see details about Biden’s fiscal spending package, but it’s fair to say most expect it to undermine the USD further over the coming months. Biden’s advisers have also been signalling to Wall Street donors that tax increases will likely come later in the year, but these may depend on the economic recovery and Covid’s impact on the economy. To that end we saw some mixed data from the US overnight. On the positive side the Philly Fed Manufacturing index showed solid gains jumping to 26.5 from 11.1 prior. But countering this was the harsh reality of the employment situation with weekly unemployment claims remaining above 900k. 

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Risk appetite wanes as equities come off early 2021 highs.

Worldwide coronavirus cases surpass 95.7 million with over 2,044,000 official deaths.

Key Points:

• Brexit has been agreed on the 30th December between UK and EU lawmakers but issues are still a plenty with many problems in fisheries
• US Holiday saw quiet markets Monday with Martin Luther King Day
• Iron Ore markets continue to break records after Chinese steel productions hit fresh highs
• Chinese 4th quarter GDP slides short of estimates but overall the economy expanded by 2.0% in 2020 while the rest of the world suffered through the coronavirus pandemic

Major Announcements last week:

  • US Retail Sales prints lower at -1.4%, -0.1% expected
  • US bank holiday (MLK) slows markets Monday
  • China have fresh lockdowns after a new coronavirus outbreak
  • Iron Ore prices hit record levels

NZD crosses trade near highs

Worldwide coronavirus cases surpass 77.68 million with over 1708,000 official deaths.

Key Points:

• 900B US bailout package unveiled by US lawmakers to aid jobless Americans.
• Asian stocks dipped today after U.S. equities joined a global decline as a new variant of the coronavirus in the U.K. and a wave of lockdowns and travel restrictions hurt sentiment.
• The UK has had its borders with most European countries closed, with no traffic passenger or freight, going across the channel by tunnel or ferry.
• Australia preliminary November Retail sales data has been released showing a much better than forecast +7%m/m against an expected +2%
• The UK looks at widening Tier 4 restrictions across the country as cases of the mutant Covid multiply at rates not seen since April.
• The US has brought in further additional visa restrictions on Chinese officials

Major Announcements last week:

  • French and German Manufacturing released well
  • NZ Retail Sales -1.1% for November down on -0.3% predicted
  • FOMC leave rates unchanged
  • Australian Unemployment drops from 7.0% to 6.80%
  • US Final GDP third Q 33.1%