FX Update

Worldwide coronavirus cases surpass 36.7 million with over 1,066,000 official deaths.

Midweek risk appetite turned soft following comments by President Trump via twitter regarding the 2016 election involving Russian interference and rather importantly, no stimulus package until after the 2020 November election. Trump said to the media “I have been instructed by my representatives to stop negotiating until after the election”. The comments sparked a sell off in equities as the kiwi and Aussie currencies fall away sharply. The confusion over the potential stimulus package then took a U turn with Trump confirming he would in fact support targeted relief early during Thursday sessions in the form of individual stimulus to airlines of $25 Billion payroll support and another round of $1,200 to all American taxpayers. Markets again changed course with risk assets recovering losses, the kiwi lifting across the board. 

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Prospects of a US fiscal agreement supports risk

Worldwide coronavirus cases surpass 35.6 million with over 1,045,000 official deaths.

New Zealand will ease coronavirus levels in Auckland back to level 1 in line with the rest of the country later this week. New Zealand has had no new viruses since September 25th with only 34 cases in managed isolation and no-one currently receiving care in hospital. 

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Direct FX

Economic Releases

Monday 05/10

  • All Day, CNY, Bank Holiday

Tuesday 06/10

  • 3am, USD, ISM Non-Manufacturing PMI
    • Forecast 56.3
    • Previous 56.9
  • All Day, CNY, Bank Holiday
  • 430pm, AUD, Cash Rate
    • Forecast 0.25%
    • Previous 0.25%
  • 430pm, AUD, RBA Rate Statement
  • Tentative, AUD, Annual Budget Release
  • 935pm, EUR, ECB President Lagarde Speaks
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FX News

FX News

Worldwide coronavirus cases surpass 34.4 million with over 1,022,000 official deaths.

Risk sentiment improved overnight with the outlook around a coronavirus stimulus package nearing an agreement from the US government. Certainly, from earlier in the week things have improved contributing to rebound in mood with equities and risk products receiving support. We’re not quite out of the woods yet but investors are feeling a lot more positive. For months the senate has been against further economic relief, US Senate leader McConnell has said that if Pelosi and Mnuchin agree on a deal they will “take a look” with both Republicans and Democrats wanting to lock in a relief deal prior to the US Elections. Price action has seen a drop in buyers exiting the safe haven greenback putting it under pressure. This has been the main item driving global currencies over the week.   

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FX Update

Worldwide coronavirus cases surpass 33.5 million with over 1,005,000 official deaths.

The New Zealand Dollar has been camped out around 0.6550 versus the greenback in trading this week as markets wait for directional cues. Equity markets surged back, recovering most of last week’s losses with the DOW, Nasdaq and S&P all up over 1.5% this morning. Usually we would see a push higher in the NZD but with recent RBNZ dovish comments around economic uncertainty this has left the kiwi struggling to stay at current levels across the board. Last week’s RBNZ Monetary Policy review never highlighted any surprises. Holding interest rates unchanged at 0.25% and also maintaining the current level of the asset purchase programme. The central bank re-confirmed that all options are still on the table if needed including bringing in negative interest rates and or bank funding for lending schemes or possibly the purchase of foreign asset purchases. Any action won’t be taken until early 2021 however.

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FX Update

Worldwide coronavirus cases surpass 31.8 million with over 974,000 official deaths.

Currency markets head into the closing stages of this week in a “risk off” mood. Declining US stock markets are weighing on risk assets across the board and as such the NZD and AUD have seen pressure. Broad USD strength has also played a significant role in the Australasian currencies recent declines and the losses have been significant. Both the NZD and AUD have lost around 250 points vs the USD over the past week. 

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RBNZ

RBNZ in Focus

Worldwide coronavirus cases surpass 31.2 million with over 964,000 official deaths.

Currency markets have been in a holding pattern after a week of consolidations. Equity markets are trading around where they were a week ago while currencies have been confined to recent ranges after a flood of central bank meetings including the Federal Reserve decision. Risk markets were up and down with mixed economic date announcements out of Australia. Some crosses look to be trading the opposite to expected directions- the AUD one of them. The Japanese Yen also which is seen as a “safe Haven” currency to park money when things aren’t so rosy ended up the strongest currency even though markets generally traded through pockets of positivity.

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FX News

FX Update

Worldwide coronavirus cases surpass 30.3 million with over 950,000 official deaths.

New Zealand second quarter GDP turned out to be a big “wet fish”, coming in at -12.2% based on rough estimates of -12.0% predicted. The announcement had very little effect on the NZD broadly with most crosses fairly unchanged post announcement. The data however marks the biggest quarterly fall in New Zealand history with the deepest contraction on record. It puts the country formerly in a recession after first quarter GDP released down 1.6% earlier in the year. Most other economies have already announced their second quarter numbers with France almost -14%, UK posting a y/y drop of 21.7% and the US at -9.5% and Australia at -7.0%. The difference of rebounds in third quarter growth results should be dictated by coronavirus lockdowns and how governments have responded. In theory the NZ economy should bounce back hard towards year end and early 2021 as second wave lockdowns have not been as extreme as Australia for example.

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