FX News

Worldwide coronavirus cases surpass 48.3 million with over 1,228,000 official deaths.

Key Points:
The US Election hangs in the balance this morning, perhaps with an edge to Biden in the race to become President. Currently Biden is sitting on 253 electorate votes while the President sits on 213, 270 electoral votes are needed for victory. There are 6 states which are too close to call. My call on it is,- if Trump wins Nevada he will win the presidency. As votes continue to be counted President Trump has made legal claims on the legitimacy of the ballot counts in at least 4 states.
Equity markets are up overnight the fourth straight day of rises – the Nasdaq gaining over 2.5%

Worldwide coronavirus cases surpass 47.28 million with over 1,210,000 official deaths.

It’s a massive week of economic data, the biggest we have seen in a long time. Most notably the US Election Wednesday, we published a piece on this yesterday for anyone who is interested. The Melbourne Cup is later today just after the Australian Cash Rate announcement.

Just a note to clients- tomorrow as US Elections results start flowing in our market liquidity providers will be pricing accordingly to allow for wider/ volatile market conditions. If you have currency to move it may be best to do this in the morning or later in the week when market liquidity conditions return to normal trading conditions.    

I would like to preface this by saying the below analysis is in no way meant as a commentary or opinion on the performance, or personality, of President Trump. The purpose of this piece is to highlight what we think are some major shortcomings in many articles and forecasts around the outcome of the impending US election. Those shortcomings steam from a collection of polls over recent weeks that look to be wildly inaccurate. We would like to bring some balance into the discussion so clients with impending FX exposure can better manage the potential risks around expected outcomes.

Tuesday 03/11

• 4am, USD, ISM Manufacturing PMI
  • Forecast 55.6
  • Previous 55.4
• All Day, JPY, Bank Holiday
• 430pm, AUD, Cash Rate
  • Forecast 0.10%
  • Previous 0.25%
• 430pm, AUD, RBA Rate Statement

Wednesday 04/11

• All Day, Presidential Election
• 1045am, NZD, Employment Change q/q
  • Forecast -0.70%
  • Previous -0.40%
• 1045am, NZD, Unemployment Rate
  • Forecast 5.50%
  • Previous 4.00%

Worldwide coronavirus cases surpass 45.3 million with over 1,185,000 official deaths.

        Key Points:

• Angela Merkel confirmed this week that the goal of the latest wave of pandemic measures was to reduce contact of people who don’t live together by 75% in efforts to return to a level of fewer than 50 or less cases per 100,000 people. Merkel is hoping the plan will work by the end of November. 
• US stimulus talks between the Democrats and Republicans are dead but not buried with negotiations most likely to resume post the US election
• US new confirmed coronavirus cases set a new single day record of more than 83,400
• US third quarter GDP comes in at 33.0% up from estimates of 31.0% 
• Coronavirus in France is becoming dire with full lockdowns considered for 3 major cities – Paris, Lyon and Marseille
• NZ third quarter job ads are down 9.9% 

Worldwide coronavirus cases surpass 43.7 million with over 1,164,000 official deaths.

        Key Points:

• Equity markets have been hit hard as uncertainty and worry runs high in the US Election. If President Trump loses the election this will create a pullback in equity trading as investors exit long positions.
• US stimulus talks between the Dems and Republicans are dead but not buried negotiations most likely to resume post the US election
• US President Trump plans to dispute the election results if he loses, currently he is was behind in the polls
• The US grips for an explosion of coronavirus fresh infections
• NZ CPI prints at 0.7% slightly down from the forecasted 0.9%
• The Oxford Covid-19 trials has produced a strong immune response in the health of the elderly, the group which is at highest risk from the disease
• Coronavirus in France is becoming dire with full lockdowns considered for 3 major cities – Paris, Lyon and Marseille
• The RBA said they would cut the cash rate to 0.10% at the November 3rd meeting

Worldwide coronavirus cases surpass 41.9 million with over 1,142,000 official deaths.

Deep into weekly trading, markets seem to be hanging off developments in the US Fiscal stimulus negotiations for answers. Movement has been all about where things lie in the negotiations, late Thursday things seem to still be up in the air with investors mostly positive the situation should end well. Over the past few sessions the US Dollar weakened as the Democrats and Republicans drew nearer to a second massive fiscal agreement to assist US businesses and households get through the coronavirus pandemic. Risk markets have been up and down, equity indices fluctuating as Treasury secretary Steven Mnuchin and Nancy Pelosi headed into the latest round of discussions. Headline news reports that negotiations are moving in a favourable direction. The kiwi and Aussie currencies recovered off recent lows, but the way things have been going this week a risk off mood can develop very quickly should negotiations take a turn for the worst.  

Worldwide coronavirus cases surpass 40.6 million with over 1,100,000 official deaths.

An increase in coronavirus cases around the planet, the stalemate by US government negotiators around the fiscal stimulus package, and Brexit negotiations have all weighed on investor sentiment last week and into Monday trading.  

The New Zealand Labour government has won and won big. The centre left party has been triumphant in a landslide victory, the biggest swing to an incumbent government ever seen. Labour was predicted to win roughly 61 parliamentary seats but it looks like they could end up with several more as voting is confirmed in the 120 seat parliament. Labour if they choose can now form a single party majority government – it will be the first one since 1990 when Jim Bolger led the National Party to victory over Labour’s, Mike Moore that a single party non coalition government has been formed. The “Jacinda factor” has no doubt played a massive part in the way people have voted, the way she has come across in the media when dealing with Covid-19 and recently the Christchurch mosque shootings. 

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Monday 19/10

• 3pm, CNY, GDP q/y
  • Forecast 5.50%
  • Previous 3.20%

Tuesday 20/10

• 1am, USD, Fed Chair Powell Speaks
• 130pm, AUD, Monetary Policy Meeting Minutes

Worldwide coronavirus cases surpass 39 million with over 1,100,000 official deaths.

With reports surfacing on a potential bullish USD over the coming months and negative rates almost a dead cert for the RBNZ to come late 2020 or early 2021 it’s hard to strategize a bullish New Zealand Dollar mid to long term. I’m not so sure much of this mindset or view is priced into the curve, giving weight to a potential underperforming and heavy reversal in store for the kiwi. US Fed member Quarles said this week that negative rates have outweighed its potential benefits. So a shift into negative territory is off the agenda completely. This opens up debate for investors to consider the “carry trade” which involves borrowing the cheaper currency and investing it in a higher yielding one, alas the US Dollar. It’s hard to know what the RBNZ has in store when they talk of negative rates but it’s most likely to be in the -0.25% -0.50% range.