FX News

Worldwide coronavirus cases surpasses 11.7M with over 540,000 deaths officially reported.

The New Zealand Dollar is feeling pretty good at the moment with the stars aligning the kiwi continues north. Driven by positive local and offshore news flow and the deteriorating coronavirus conditions offshore. Risk on moves are not moving in the normal ways we are used to seeing, with everything moving against the US Dollar. Equities are still at extremely high levels and the USD/JPY risk barometer is trading close to March lows in line with a weaker USD. The tone of everything moving together against the greenback looks set to continue for a while longer especially in the wake of higher coronavirus infection numbers in the US. Overvalued NZD and AUD levels are a concern amid coronavirus in Victoria worsening with new lockdowns in Melbourne. With US coronavirus out of hand as well, we could see risk markets taking hits over the following weeks. This could have a flow on effect for New Zealand economically.  The RBNZ stance on monetary policy will come under strain at their next meeting on August 12 as a decrease from 0.25% looks unlikely, they may start to buy foreign assets to support the current QE program. With the government selling NZD the currency is only going to go one way. 

Worldwide coronavirus cases surpasses 11.7M with over 540,000 deaths officially reported.

Risk sentiment towards the close of the week remained perky in the face of increased coronavirus cases. The Tasman currencies pushed higher into Tuesday as coronavirus continued to worsen around the world occupying headlines in the wake of minimal economic data and US independence day holiday celebrations. As the rest of the world starts to open up restrictions the US is a different story- especially in Texas and Florida with scary daily levels of the virus. Payroll subsidies have been extended in many countries including in New Zealand. Jacinda confirmed the subsidy would not be extended again past 1 September just before the general election. Loans to small businesses have been extended however to the end of 2020. The sharp turnaround in NZ Retail spending recently up by 50% since lockdown level 4 is encouraging as these numbers are similar to 2019 levels. We don’t expect this to continue into late 2020 in line with cancellation of wage subsidies just mentioned and unemployment concerns. As a lot of households have canned overseas holidays, New Zealanders will start to increase their spending on local holidays. This will give tourism operators some breathing space after staring down the barrel of very little or no earnings. 

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Tuesday 07/07

• 2am, USD, ISM Non-Manufacturing PMI
  • Forecast 50
  • Previous 45.4
• 230am, CAD, BOC Business Outlook Survey
• 430pm, AUD, Cash Rate
  • Forecast 0.25%
  • Previous 0.25%
• 430pm, AUD, RBA Rate Statement

Worldwide coronavirus cases surpases 10.785M with over 517,000 deaths officially reported.

Safe Haven buying midweek was replaced by optimism with positive news out of the US with a trifecta of economic releases. Manufacturing for June bounced higher than expected from 43.1 to 52.6 as the industry formally entered expansionary territory- given it is back above the 50 breakeven threshold. The rise was the largest rise since August 1980. New manufacturing orders were sharply higher along with production increasing from 33 pts to 57.2. Jobs data surged as US firms added more than 2.37M jobs to the economy in June. This is a turnaround from May’s upwardly revised job losses of -3.065M as companies continue to re employ workers and the economy slowly comes back online. US equity markets rebounded with the Nasdaq hitting a record high of 10197 up 1% as news broke that Covid-19 vaccines by companies BioNTech and Pfizer were making progress. Both companies and their experimental vaccines have generated neutralizing antibodies at a higher rate than other placebo receivers recovering from the coronavirus infection. FDA’s guidelines for vaccine development suggest a long road before a vaccine is widely available.    

Worldwide coronavirus cases surpasses 10.4M with over 507,000 deaths officially reported.

As most countries gear up for a second wave of coronavirus the burning question is how bad will this be? 

While most economic news recently out of the US has been positive such as Retail Sales and Home Sales is undoubtedly good news, is it sustainable? The dreaded second wave could have serious consequences on the state of mental health and economies around the world. The US govt stimulus programs only have a limited life span until the money runs out. Coronavirus is rising at an alarming rate with some states and hot spots remaining in lockdown. Payroll protection loans to small businesses and unemployment bonuses have nearly ended creating an awful time for employers as they consider whether to keep staff on or not. Where to from here? Victoria, Australia has just reported 75 new cases on Monday with the chief health officer suggesting it will get worse before it improves. Of these cases 6 are said to be community spread with most (57%) Australians expecting the virus to impact home activities, employment situations and social behavior for longer than 6 months.  Any trans- bubble earlier considered has long been abandoned in my book as we eye a long road to economic global recovery. 

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Monday 29/06

• All Day, EUR, Italian Bank Holiday

Tuesday 30/06

• 1pm, CNY, Manufacturing PMI
  • Forecast 50.4
  • Previous 50.6

Wednesday 01/07

• 1230am, CAD, GDP m/m
  • Forecast -10.50
  • Previous -7.20
• 430am, USD, Fed Chair Powell Testifies

Worldwide coronavirus cases surpasses 9.18M with over 474,000 deaths officially reported.

Risk sentiment looks to be back dominating play both directions as market participants start to digest the possibilities of second wave coronavirus around the world and its implications on economies now and long term. One could argue that we are not yet out of wave one with global statistics still showing an alarming 20,000 plus cases popping up every day.  News out of Beijing China doesn’t look good after the virus was all but gone on the 9th of June with the last infected case being released from hospital, now they have over 200 cases with hundreds of flights cancelled, schools closed and residential facilities back in strict coordinated lockdown. As with the Wuhan outbreak the situation in Beijing seems to be fairly well managed, the same cannot be said for parts of the US with some states -Florida and Arizona along with California all have new cases rising exponentially. Countries like Brazil, India, Peru and Chile have all experienced a flood of new cases in the last few days, including our friends in Victoria (Australia). All this adds up to a pessimistic market tone falling in line with more distancing restrictions being ratcheted up around the globe. 

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Monday 22/06

• 11am, AUD, RBA Gov Lowe Speaks

Tuesday 23/06

• 3am, CAD, BOC Gov Macklem Speaks
• 715pm, EUR, French Flash Services PMI
  • Forecast 44.9
  • Previous 31.1
• 730pm, EUR, German Flash Manufacturing PMI
  • Forecast 41.5
  • Previous 36.6
• 730pm, EUR, German Flash Services PMI
  • Forecast 41.7
  • Previous 32.6

Worldwide coronavirus cases surpasses 8.5M with over 455,000 deaths officially reported.

The New Zealand economy shrank by 1.6% in the January to March 2020 quarter, or roughly 310B New Zealand Dollars ending 9 years of growth. Expectations were the economy to shrink by 1.0% in the first quarter missing the mark. Predictions are for the economy to contract around 14.0% in the second quarter. This will mark a formal drop into recession when figures release on 18 September. Compared to first quarter 2019 the economy was down 0.2% y/y but actually grew by 1.5% in the year ending 31 March 2020. Figures show that this is the first contraction in growth since the third quarter of 2009 and the largest first quarter contraction in 29 years highlighting the horrific economic impact coronavirus has and will continue to have on the country’s growth.

Worldwide coronavirus cases surpasses 8M with over 435,000 deaths officially reported.

The Japanese Yen closed the week earning the top spot, beating out all other major currencies as “risk trade action” fades and sends investors and traders away from risk assets. We also saw better economic data out in Japan potentially supporting the Yen over the week. We saw a strong bounce in US Dollar performance with market reaction to shifts towards a dovish economic outlook by the Federal Reserve, reports of more clusters of coronavirus appearing around the US are also weighing in. Several months back we were talking about a possible V shaped economic global comeback/recovery meaning the economic impact would be deep but bounce back hard.