Market Update

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Day 2- Level 2 NZ lockdown.

The Reserve Bank of New Zealand Monetary Policy Committee agreed to leave the cash rate on hold at 0.25% Wednesday and agreed to expand the 33B (LSAP)- Large Scale Asset Purchase programme to 60B. The LSAP’s include NZ Govt Bonds, Local Government Funding Agency Bonds and NZ Government Inflation Indexed Bonds. The global fallout from disruption from coronavirus has led to lower economic growth and inflation with unemployment hugely affected. The RBNZ said even if New Zealand manages to contain the virus, or knocks it out completely, reduced world demand for products will mean a lower demand for NZ export products. Adrian Orr said negative Interest Rates could become an option in the future. The release took the NZDUSD off 0.6080 to just off 0.6000
The NZ Annual Budget known as the “Rebuilding Together” budget announced yesterday was one the of the weirdest on record.

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Direct FX

Risk Currencies Push Higher

Day 11-  Level 3 NZ lockdown

Risk currency pairs ruled the roost for most of last week with the Australian Dollar, New Zealand Dollar and the Canadian Dollar all doing well against the major currencies, the big mover being the Aussie outperforming the Pound 3.0%. The US jobs report confirmed a terrible April for Job losses with a further 20.5M Americans filing for unemployment. The Unemployment rate has surged to WW2 high of 14.7%. The English Pound has recovered most of the March losses amid coronavirus infections, pivoting around the 1.25 area against the US Dollar. We do however see limited movement north in 2020 for the Pound as economic conditions worsen with covid-19 in the UK and Boris struggles to piece together post Brexit trade negotiations.

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Economic Releases

Economic Releases

Monday 11/05

  • 1pm, NZD, ANZ Business Confidence
    • Previous -66.6

Wednesday 13/05

  • 1230am, USD, CPI m/m
    • Forecast -0.70%
    • Previous -0.40%
  • 2pm, NZD, Official Cash Rate 
    • Forecast 0.25%
    • Previous 0.25%
  • 2pm, NZD, RBNZ Monetary Policy Statement 
  • 2pm, NZD, RBNZ Rate Statement 
  • Tentative, NZD, RBNZ Press Conference
  • 6pm, GBP, Prelim GDP q/q
    • Forecast -2.50%
    • Previous 0.00%
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FX News

FX Update

Day 11-  Level 3 NZ lockdown. 

Comparisons between economic reviews and macro themes from the beginning of this year to today’s releases are vastly different. Times of improving conditions and economic recovery have fast eroded in the current global landscape we are now part of. Monetary policies of world leading central bank countries have backtracked from solid economic indicators such as improving employment and inflation expectations to what we see today. 

Coronavirus has indeed put up a massive roadblock up to any global momentum. Strategy of the RBNZ has been like all other central banks- bringing out all arsenal of extreme measures to combat the fallout of the virus with record fiscal stimulus and QE (quantitative easing) and much lower interest rates-  New Zealand currently has the lowest cash rate on record at 0.25%.

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FX Update

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Day 8-  Level 3 NZ lockdown. 

Zero new cases of coronavirus were reported yesterday in New Zealand, the first time since the first reported case in the country on 28th February. Standard and Poor’s rating agency have rated NZ credit rating a AA suggesting a positive outlook based mainly off a strong fiscal position.

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International Trade

FX Update

Day 2-  Level 3 NZ lockdown. 

A wave of optimism filled the air Monday with investors feeling comfortable around risk investments as countries around the world start to relax Covid-19 restrictions. The New Zealand Dollar has held its ground over the 0.60 mark, but the success story of late has been the Australian Dollar. The AUD has been the strongest performer not just over the past week but it has outperformed all its peers since April 6th and continues to be well supported. Coronavirus results have not only been extremely good (bit of luck perhaps) but Chinese data has also been favorable, boosting prospects of economic trade between the two countries. With supply chain disruption subsiding and a number of large companies back online things are starting to improve. Both NZ and Australia remain susceptible to mood changes and massive downturn in economic activity with huge monetary and fiscal stimulus still required to prop things up. But for now both the NZD and AUD are being driven higher.         

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Economic Releases

Tuesday 28/04

  • 930am, USD, President Trump Speaks

Wednesday 29/04

  • 2am, USD, CB Consumer Confidence
    • Forecast 88.2
    • Previous 120
  • All Day, JPY, Bank Holiday
  • 130pm, AUD, CPI q/q
    • Forecast 0.20%
    • Previous 0.70%
  • 130pm, AUD, Trimmed Mean CPI q/q
    • Forecast 0.30%
    • Previous 0.40%
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President Trump

Market Overview

Day 26 of the official NZ lockdown. 

As we end another week of lockdown it’s hard not to notice how subdued currencies have been. Sure we have had windows of volatility, even small flash moves no-one can explain but overall the main crosses have flatlined with not a whole lot economic activity. Even the USD/JPY has been stuck in the 107’s for the second week running. The price of Crude Oil has been the main talking point with price dropping way below zero, with one oil analyst saying- it’s now worth as much as a bucket of faeces. It stabalised into Friday with price back around a measly but welcomed 17.00 per barrel. This boosted stock prices as well and risk currencies with the kiwi operating around 0.6000 against the big dollar, but, most main currency pairs are trading without any real direction. The Aussie rose across the board as Retail Sales published a surprisingly decent figure (up 8.0%) but was quick to trim its gains. World central banks continue to offer unprecedented easing policies by dishing out massive amounts of cash to stimulate economies from worst case covid-19 related depression scenarios, the bank of Japan will meet again early next week to discuss further easing. On the whole we see another bout of risk-off market sentiment on the horizon amid the ongoing Covid-19 uncertainty heading into the weekend and into next week and expect currency risk related products to decline.        

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NZD Holds Gains

NZD Holds Gains

Day 26 of the official NZ lockdown. 

NZ will ease level 4 Covid-19 restrictions the govt announced Monday. From 27th April NZ will reopen on Level 3 with many businesses able to re-open again although in a contactless manner. The big change will be with restaurants, and food operators who will be able to sell food via delivery service only. Around a third of these businesses nationwide will reopen. Workspaces will also be able to reopen but the government is asking that people who can work from home continue to do so. Non-essential travel and movement will remain the same with most people required to stay at home unless its approved style activity. 

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