FX News

Market Overview:

Markets closed in the red Friday in a risk off mood. Equities fall over 2% with European stocks down also over 0.5%. US Equities have traded back to April 2018 levels after global data continues to disappoint. Chinese Industrial output and Retail Sales came in light sending risk associated currencies lower late Friday followed by weak Manufacturing data out of France and Germany. The NZD momentarily recovered towards 0.6800 but failed to make any headway past 0.6890 at the close. The NZD the weakest traded currency over the past few days along with the British Pound, the kiwi down 1% against the greenback and the Pound around 1.10%. It’s not surprising we have seen investors selling risk currencies and equities as global trade tensions heighten. China has already purchased 500,000 tons of US Soybeans as part of the ongoing 90 days truce agreement and will start to buy American corn soon. China has confirmed they will also remove the tariff it has on vehicle imports the US. North Korea have expressed their disbelief at the recent US sanctions accusing the US state department of taking last year’s progress back to a hostile situation. The US said they would seize the assets of Mr Kim’s main man Choe Ryong-hae, Jong Khong-thaek and Pak Kwang-ho for abusing human rights in North Korea which included, killings, torture, rape and sexual violence. The North Korean statement included: “maximum pressure” would be the United States “greatest miscalculation”. The question now is – did President Trump really achieve anything in the June meeting? This week’s Fed meeting the main focus of the week has the potential to be exciting with several market analysts suggesting they will not raise rates to 2.5% but do it next year instead. This week we will see much assessment of what path the Fed will follow over the next year and beyond. This week key local mover will be quarterly GDP with numbers expecting to print around the 0.6% area in line with recent growth. Read more

Market Overview:

Equity markets continue to be on a wild ride of late with realities of ongoing trade tariffs and the Fed backing down from its recent staunch angle on its tightening bias. With a fair amount of uncertainty still in the air US stocks have been volatile. The S&P was down 62 points Friday -2.3% to 2633, the Nasdaq fell 219 points over 3.0% to 6969 while the DOW closed down 558 points- 2.25% to 24,284. The S&P has been noted as registering declines of over 2% more than 16 times in 2018 compared to nil in the 2017 year. With equities continuing to fall investors are becoming increasingly anxious of prospects of a recession in the developed countries. The current pattern of such an event happening does not quit fit with times gone by of economic trends to suggest this. In the group of the 7 biggest economies Germany, Italy and Japan have all experienced slower economic indicators over the last three months signalling weaker global demand. Crude oil prices have fallen sharply showing a weaker global overall demand and oversupply problem. The International Monetary Fund’s (IMF) chief economist Maurice Obstfeld is retiring at the end of the year, offering up comments prior to his departure warning that global growth is slowing and the US economy won’t escape the downdraft. He described global growth as “steady or plateauing”. China growth has slowed for November as the effects of the tariff war take hold with the effects oi shipping front-loading. Total exports grew by only 5.4% from the previous year coming off a 15.6% increase for October with the result expected to be somewhere around 10.0% China’s total trade surplus has grown to 44.7B from 34B in October. The addition of 155,000 jobs to the US employment market was significantly down on the 200,000 expectations Friday adding further doubts that the Fed will stick to its three rates hikes in 2019. Unemployment remained the same at 3.7%. The result dragged associated risk currencies lower, the kiwi back in the low 0.68’s but holding tough compared to other currencies- the Australian Dollar losing 1.4% against the big dollar. Read more

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Australia

Initial reactions to the Trump meeting with Xi Jinping were viewed as a positive step to a possible truce and potential tariff deal which could be negotiated between the US and China. This quickly became undone after trump has again taken a hard line against China taking advantage of US wealth. The Australian Dollar came off its high of 0.7400 against the greenback Monday in a market which fast became risk averse – retracing back to 0.7265 in safe play move. Australian GDP slowed in the September quarter driven by a slowdown in household spending. The economy only grew by a paltry 0.3% after missing forecast for an increase of 0.6%. This was seen as an unusually large miss with the weakest quarterly expansion since 2016. Year on year figures have slowed to just 2.8% well below the 3.3% speed predicted. This will now cast doubts over any such increases in the official cash rates over 2019. The official Cash rate was announced unchanged at 1.50% extending the period of no change since August 2016 saying rates will remain unchanged for some time. Retail Sales printed and was unchanged from the 0.3% expected.         

New Zealand

The New Zealand Dollar retreated off its weekly high of 0.6965 against the greenback Monday after risk sentiment took a hit. With suspicions now that a trade truce between China and the US could well have been just a temporary fob off by Trump, markets have reacted unfavorably sending risk currencies lower. The kiwi stalled off all highs in the crosses devaluing into Wednesday’s global dairy auction. Prices were predicted to be higher by roughly 2% which is what exactly how it happened with the official change in the GDT price index representing a lift to prices by 2.2%, with whole milk powder coming in at 2.5%. This is the first increase in overall prices since May with prices lifting off two year lows. Yesterday Fonterra adjusted its forecast farmgate milk solid price to $6.00 to $6.30 with most banks saying  the figure could be as low as $6.00 to $6.10/kgms. NZ has no data of significance for the remained of the week locally, US employment figures Saturday morning NZT will be a pivotal driver of price early next week.    Read more

Australia

Seasonally adjusted construction figures disappointed Wednesday after numbers showed a declining sector. The total construction for September fall 2.8% for the quarter based on predictions of 0.9% growth. With Melbourne and Sydney house prices dropping recently this follows a trend which could follow through well into 2019. Comments from last week’s RBA minutes concentrated on the importance of the Australian Dollar playing a part in setting future monetary policy. Its business as usual for the RBA unless a sudden market shock event was to surprise. In the event of a strengthening global economy, the effect on the Australian economy and the outcome on the exchange rate of the AUD would be pivotal. Fed chairman Powell spoke Wednesday night making dovish comments towards further tightening bias which turned markets to risk on with the Aussie Dollar pushing north versus the big dollar. Private Capital Expenditure released at little light at -0.5% based on predictions of 1.1% but had no real effect on price.   

New Zealand

The New Zealand Dollar, surprisingly, after running the numbers has been the strongest currency of the main basket since August 2 2019 outperforming everything with the greenback a close second. On August 2 we were trading around the 0.6780 area compared to today’s price of 0.6860 level. Clearly this is no huge shift in price action but with a short spell to 0.6420 it shows how resilient the NZD has been compared to its rivals which have all devalued in comparison. Adrian Orr delivered his Financial Stability report Wednesday saying the NZ financial system is sound and while offshore trade risks still are a little unsettling, economic risks have abated. LVR lending ratios were lowered in favour of the investor and home owner suggesting credit banking credit risks are in a good spot currently. ANZ Business confidence printed bang on expectations with no surprises. Interests now lies with G20 tomorrow.     Read more

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Market Overview:

The New Zealand Dollar was first out of the blocks Monday morning with Retail Sales printing much worse than markets predicted. The total value of retail sales increased 0.0% from the previous quarter with growth in the Waikato region up 2.2%. The real tale though was that markets were expecting figures to be much better around the 1.0% mark so 0.0% was disappointing. The New Zealand Dollar falling away sharply continuing its momentum to the downside from last week’s risk off close continuing as the week’s worst performer against the main basket. In a week of low volume trading we saw super thin conditions with US Thanksgiving and Japanese Holiday holidays. Late Friday it was good to see most currencies show a bit of movement albeit to the downside from the rather stagnant week we had. Risk off themes we think will continue this week with Brexit leading the way. The EU has officially endorsed Theresa May’s terms of the UK’s withdrawal agreement bringing an end to negotiations which have gone on now for 20 months. The tough part begins this week when Theresa May will now entice the UK Parliament to agree on the terms of the agreement, she will spend the next fortnight travelling the country selling the deal before a parliamentary vote which will take place in early December. China will front at this week’s G20 summit in Argentina showing the world that they are cutting their reliance of exports in an effort to derail Trump’s government of allies in the ongoing trade war. Last week US trade representative Lighthizer said that China has not changed its tactics or practices and that this has dampened hopes for an agreement at the upcoming summit. China reacted by saying this was totally unacceptable and that the US government has broken its commitments to world trade organisation members. Beijing current account is nearly neutral after peaking in 2008 at 421 Billion surplus. Even with China’s weak equity market and slowing economy China are still unwilling to budge, China exports continue to grow based on recent data despite the tariffs. Markets are unsure how this will eventually be resolved but with further uncertainty and perhaps negativity this week we expect the recent risk averse theme to continue. Crude Oil was the biggest mover Friday when it was devalued by over 6.5% to 50.70 narrowly escaping price action in the 49’s after traders liquidated the asset after Trump’s earlier calls for lower oil prices and the global growth outlook weighed heavy. This week should see reasonable excitement with Fed members speaking and RBNZ, Adrian Orr Wednesday around financial stability. Read more

Market Overview

Currency markets ended the week uneventfully after a huge week of Brexit related headlines. Currencies took a much earned breather with direction extremely tough to pick later in the week. The weakest currency of the main players the British Pound depreciated over 1.1% against the US Dollar and 3.1% against the surging kiwi Dollar. The New Zealand Dollar remains the strongest currency two weeks straight with analysts a tad baffled as to the ongoing bust through key resistance levels. A shift in Fed speak from Philadelphia Fed Reserve Harker rocked the boat when he said he wasn’t convinced a hike in December is the correct move to make citing rising uncertainty of economic outlook. Fed’s Evans also summarised by saying international trade is slower with Brexit and the US housing market all creating global uncertainties. It was his opinion though that these factors were not enough to make changes to the current monetary trajectory. This week’s RBA minutes looks to be a key headline this week when they will summarise the November meeting, with more than likely a hawkish bias based on recent positive economic data. US and China trade discussions have surfaced again over the weekend after weeks of halted communications. Both sides are working together closely to arrive at a long term solution with Donald Trump and Xi Jinping expected to meet again later in the month at the G20 summit in Argentina. Meanwhile Vice president Pence spoke with Xi Jinping at the Papua New Guinea Asia Pacific economic summit saying he was concerned China never had any intention of reaching a consensus – the Papua New Guinea prime minister saying the entire world is worried about the ongoing tensions between the two nations. They still appear a world away with negotiating a sustainable agreement. Brexit carnage will continue this week leaving the British Pound venerable again to whipsaw movement. Recent headlines are suggesting a vote of no confidence is building steam with Theresa May saying if she was ousted it wouldn’t make Brexit any easier. Last week Brexit secretary Dominic Raab and work and pensions secretary Esther Mcvey resigned in protest of May’s Brexit plan. US and Japanese Bank holiday Friday with Thanksgiving should bring an orderly end to the week. Read more