FX News

Worldwide coronavirus cases surpass 17.45million with over 675,000 official deaths.

There was no change Thursday morning from the US Federal Reserve as they kept their main rate at 0.25%. With Covid-19 still at large and far from beaten the outlook for the US economy is not looking good. The general view from the central bank was that of a dovish stance with chances of a strategy shift in September’s policy meeting high. With the Fed extending emergency lending and focus on further fiscal stimulus we were not going to see any significant changes.  Fed chairman Powell seems confident the economy is pulling out of recent coronavirus affected times and is on track to expect full employment post 2022. Only two fed members expect the refinancing rate to increase before 2022. The US Dollar moved lower post decision against the major currencies earning it the weakest currency over the course of the week and well below the gain line for July.

Worldwide coronavirus cases surpass 16.4M with over 651,000 deaths officially reported.

The New Zealand Dollar and the Australian Dollar held top positions midweek but lost ground to the Euro and Pound towards the weekly close as “risk markets” took on water. The US Dollar traded flat at the bottom of the pile in the major group of currencies and never really kicked on. US politicians are still trying to come to an agreement as to the next support package to support the local economy as coronavirus cases continue to rise. Tensions between China and the US are still tender with the US ordering the Chinese consulate in Texas to be closed. China has retaliated by ordering the US to close its Chengdu consulate. This strained risk and spooked markets as equities dropped in Asia and the US. US Jobless claims rose for the first time since March confirming the jobs situation in the US is starting to deteriorate again. 1.4M people filed for unemployment in the week ending 18 July vs 1.3M predicted representing an astonishing number of newly laid off workers. This marks the total number of people who have filed for unemployment since March 21 at 53 million in the US.    

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Wednesday 29/07

• 130pm, AUD, CPI q/q
  • Forecast -2.00%
  • Previous 0.30%
• 130pm, AUD, Trimmed Mean CPI q/q
  • Forecast 0.10%
  • Previous 0.50%

Worldwide coronavirus cases surpasses 14.8M with over 612,000 deaths officially reported.

The New Zealand Dollar and the Australian Dollar closed out the week keeping their top spots against the major currencies so far for the month for July.

Victoria coronavirus stole the attention last week when the state clocked 428 new cases on Friday and a further 363 Sunday. The virus has got so bad in the community Premier Daniel Andrews announced masks will be compulsory in Melbourne in a few days’ time. The state has recorded 12 consecutive days of triple digit increases. Consumer confidence in Australia has taken a hit over the past few days with Victoria deteriorating 10% while the rest of Australia is down 4.5%. To make matters worse Australian Unemployment reached 7.4% in June, a 22 year high which will keep the local mood low. Federal government is expected to increase their fiscal stimulus this week which could boost sentiment. This is the first economic statement since the pandemic hit the country in March. The budget will include 90B in the already announced stimulus, and an extra 50B of new measures. The Aussie remains resilient finishing the week just below 0.70c but further coronavirus outbreaks in Victoria should cast doubts over any V shaped recovery momentum. Vaccine hopes and recently buoyant commodity prices, in particular iron ore prices, together with China’s economic rebound have kept the Aussie moving higher. While “risk” mood remains stable, the Australian Dollar should continue to travel north for the moment.

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Tuesday 21/07

230pm, AUD, RBA Gov Lowe Speaks

Wednesday 22/07

1230am, CAD, Core Retail Sales m/m
Previous -22.00%

Worldwide coronavirus cases surpass 13.2M with over 574,000 deaths officially reported.

Key Points:

• Last week’s performance of the New Zealand Dollar saw a net gain against the majors, the Pound was the standout though climbing from Tuesday with a number of economic tax incentive announcements
• President Trump has spoken out about prospects on a phase two trade deal. He says the relationship with China has been “severely damaged”. White House advisor Navarro expects Trump to take heavy action against Chinese owned TikTok and WeChat for engaging in “information warfare”.
• The US military base in Okinawa has been locked down after 61 new coronavirus cases were reported, there are around 25,000 personal on the base

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