FX News

Market Overview:

With the US pulling from the Iran deal this has put pressure on European countries which still want the deal to stay in place. China, France, Russia, Britain and Germany all have expressed commitment to stay in the deal. Germany in particular has said they would try to persuade the US government to continue with it. On Sunday the US government threatened to bring about new sanctions on these countries who currently do business with Iran. The US are still hopeful that they and their allies could strike up a new deal with Iran. The US national security adviser John Bolton said a possible deal could be made but this depends on the “conduct of the other governments”. The withdraw by the US has raised the risk of further conflict in the Middle East with a lack of current stability there. Currency markets had an uneventful close the week, the US Dollar is still the currency of choice, then it’s a distant second to the Canadian Dollar. Crude Oil prices soured based on uneasiness with the Iran situation raising to a high of 71.71 before settling around 70.70 at the weekly close. The US Dollar Index spiked to 92.55 showing the wide ranging support for the greenback. Equities remain strong as well with the DOW index coming off a weekly low of 24200 to close around 24830. The RBA kept the benchmark rate unchanged at 1.5% extending its record breaking run and the Bank of England (BoE) left their benchmark cash rate unchanged at 0.50% in a 2-7 vote as markets expected, although the market saw the BoE comments as generally dovish after the pricing out a rate hike for 2018. This Thursday we have the NZ Budget, this will set the tone for the NZ Dollar for a while to come. With business sentiment at a low since the Labour government took office Ardern is mindful of this while the budget will aim to change people’s perception that the country’s economic tender situation is a little more rosy. We can expect to see a homeless package of $100M come in along with a health boost of over 8B over the next 4 years. Read more

The New Zealand dollar is weaker this morning in the wake of the RBNZ’s Monetary Policy Statement. They left the cash rate unchanged at 1.75%
The NZD has fallen across the board, down around half a cent against the USD, and AUD.
The Central bank has slightly downgraded their forecasted inflation rate in June 2019 to 1.6% from 1.8% prior. They said they expect to keep the OCR (Official Cash Rate) at this expansionary level for a considerable period of time.

Market Overview:

On the 2nd of April 2015 an agreement was put into place between Iran and a group of super power countries. The agreement essentially was to put in place with limitations to Iran producing nuclear weapons. In exchange the 6 countries involved Russia, France, China, UK, US and Germany would lift economic sanctions. President Trump has come forward recently and stated he would not support such an agreement as Iran has broken the agreement by not allowing international access to inspectors among other reasons. He has called for new sanctions on Iran and has requested congress to instigate changes. Iran’s foreign policy head Federica Mogherini has said there has not been any violation of the agreement and stated the agreement could not be negotiated. Over the week we will watch how things develop here but news alone around this could rattle markets and has the makings off investors reaching for safe haven products. Non-Farm Payroll figures disappointing to the downside Saturdays morning coming in with an increase of 164,000 for April but down on the expected 190,000 number. The US unemployment rate dropped to 3.9% from 4.00% initially increasing the value of the US Dollar but markets soon retraced to pre- announcement levels across the board. The US Dollar index remains strong at 92.55 with risk sentiment benefiting equities and commodity markets all closing up over 1%. The Reserve Bank of New Zealand (RBNZ) will announce their cash rate Thursday with no change from 1.75% expected. The Bank of England (BOE) will also announce their cash rate Thursday night NZ time and will no doubt leave the rate at 0.5% unchanged. A couple of weeks back we were pricing in a 85% certainty of a hike to 0.75% but the statistic is now under 10% with a round of disappointing economic data showing struggles with falling inflation statistics.  Read more

Market Overview:

US President Donald Trump threatened to close down the federal Government in September this year if congress didn’t approve further funding for his wall to be built on the border of Mexico. Trump will no-doubt run into issues when his idea won’t be supported by fellow Republicans. He signed a Trillion Dollar spending bill which will keep the government funded through to the end of September 2018. You will remember how the government briefly shut down in January 2018 over immigration differences then. The US Dollar has surged of late with home sales and services PMI both supportive publishing well above expectations earlier helping the US Dollar to advance over all the main G10 currencies. Everything of note recently has published well for the Americans including upside on inflation which should lead the Federal Reserve to hike rates three more times this year. The next announcement is this Thursday morning NZ time along with the usual monetary statement. Consensus is that the cash rate will for now stay at 1.75%. The US Dollar index firmly rejected a 92.00 handle late last week along with the 10 year yield coming off its four year high of 3.035% to close the week at 2.96%. The Dow came off its high of 24400 mid last week and could remain under pressure if the 10 year US bond rises further.  The US cannabis index jumped more than 15% the biggest one-day gain of the year based on a shift in US cannabis policy. President Trump signed a letter in support of letting each US State decide how to regulate marijuana, in a statement protecting state cannabis rights. This could send cannabis stocks soaring to all-time highs. The Marijuana Index is currently trading at 88.81 and has setup to potentially be one of the best products in 2018 to invest in. This week we have NZ unemployment rate publishing which should offer the NZD support above crucial 0.7000 against the greenback if last month’s drop of 0.2% is anything to go off. Brexit news out overnight is suggesting a deal to exit the EU is becoming less likely with the Cross party amendment passed with support of 19 Tory Rebels winning by a majority of 91 votes. Ministers have warned that should government vote against the deal by negotiators, Britain would leave the bloc with no agreement. Read more

Market Overview:

Wall street closed last week down around 1% with tech stocks underperforming. Performance so far this week has been somewhat underwhelming as well with indices failing to stage any sort of recovery. Equities are not being helped by interest rates increases, with the US 10-year knocking of the door of 3%. It’s a massive level technically, and psychologically, and a break above 3% may well see quick move to 3.25% develop. It would also provide confirmation in many trader’s eyes, that bonds are now in a long-term bear market. That’s something the stock market should be very concerned about. News over the weekend that North Korea has suspended its Nuclear programme has been welcomed, albeit with a healthy dose of scepticism. It remains to be seen if Kim Jong Un is simply looking to gain concessions, only to restart the programme over the coming years, or if he genuinely wants a better relationship with the rest of the world. But from a geo-political point of view, it’s step in the right direction.

Australia

The Australian dollar (AUD) struggled last week against most other currencies, although it did outperform the New Zealand dollar (NZD). The key release last week was Australian Employment Change that printed below forecast at +4.9k. This week the focus is firmly on inflation data due out in a few hours’ time. The market is looking for a quarterly increase of 0.5%, down a touch from the prior quarters 0.6% result. That would put the year on year rate of inflation at 1.85%. That is below the RBA’s 2-3% target, which has been the case for more than 2 years now. The RBA expect underlying inflation to slowly climb back to 2% over the next couple of years. With that sort of outlook, it would be foolish to expect the central bank to adjust the cash rate any time soon. Read more

Market Overview:

Markets closed the week relatively uneventfully with no significant data publishing to shift things around. Investors took on risk earlier with equities and commodity markets all making gains, but with Syrian Missile Strike the headline towards the end of the week markets turned to the safe haven as gold came off its low trading back at 1343. Heated trade discussions continued between the US and China with China aiming their efforts directly at US agriculture. Beijing has promised to retaliate with more tariffs aimed at the US agriculture sector which includes soy bean, which could have a massive detrimental effect on US farmers. Reports are that President Trump may be contemplating a move back into TPP (Trans Pacific Partnership). When US withdraw from the TPP this was damaging to US agriculture, but with the Chinese on the front foot with current trade negotiations this could spell total disaster for US farmers. The US, France and UK Fridaynight launched 105 missiles into Syria targeting chemical weapons facilities with reports suggesting to good effect taking out a select few. There are an estimated 50 warehouses in Syria which contain storage of chemical weapons after the 2013 Syria chemical weapons disarmament deal only partially dismantled existing stockpiles. So one would suspect that with the ease of creating further chemical weapons and the stash currently held, the job done by the US, France and UK is only partially completed. Interestingly President Trump never had authority from congress and Theresa May never consulted parliament prior to launching the air strikes. Nine FOMC members speak this week with US Core Retail Sales tomorrow which will give us clues as to further Dollar direction for 2018. Read more

Australia

The Australian Dollar (AUD) has been broadly stronger against most pairs this week but has generally underperformed this month. As risk markets turned, investors purchased the US Dollar and sold equities leading to the market travelling sideways. Softer CPI Chinese data for March published at 2.1% year on year versus 2.6% expectation bringing the Aussie off its highs across the board. RBA governor Lowe was hawkish when he said the RBA will keep rates on hold for a period of time, the next move will be a hike and may come as a “shock” to markets. The Australian Dollar (AUD) has found some much needed support Friday as the market turned to risk on.

New Zealand

The New Zealand Dollar (NZD) remains strong against a basket of currencies with risk appetite dictating markets. The kiwi came off its highs against the crosses running out of puff post FOMC minutes. Missile strikes in Syria look to be close to starting which helped to dampen stock and commodity prices.  The Reserve Bank assistant governor McDermott spoke Thursday on the evolving inflation targeting over the past 30 years. Dr McDermott said: “Transparency in meeting our objective is as important for anchoring long-term inflation expectations now as it was in 1989, when the framework started. We will be using new communication techniques, such as publishing non-attributed records of meetings that reflect any differences of view among the Monetary Policy Committee.”  “The New Zealand framework has changed significantly over thirty years, reflecting lessons learned and the changing economic and political environment. We are about to enter the next stage of that evolution”. The New Zealand Dollar (NZD) was unmoved during the speech. Markets await further Tweets from President Trump on the Syrian situation.  The business NZ manufacturing index printed slightly worse than expected Friday suggesting a slowing manufacturing sector but made no dent in the surging kiwi. Read more

Market Overview:

Trade war, NAFTA and N.Korea all dominate the news.
Friday’s US Non-Farm Payroll figures were negative as the headline print of +103k came in way below the expected +188k, markets reacted accordingly dropping the US Dollar like a lead balloon and helping to raise currencies like GBP, EUR, AUD, CAD and the New Zealand Dollar (NZD). US Unemployment was also below par printing at 4.1% when 4.00 was expected. The Fed’s FOMC minutes Wednesday may read hawkish in line with the dot plot. Trade discussions have continued with the US government and China officials this week, with so many new requests by each party it’s hard to keep track of just who is winning the battle. President Trump tweeted: China will take down its trade barriers because it’s the right thing to do. Taxes will become reciprocal and a deal will be made on intellectual property. It’s clear the US Government wants to negotiate. Over the weekend Steven Mnuchin acknowledged the potential for a trade war but at the same time said he wasn’t expecting it to happen. As things progress it’s evident that the US has the most to lose as President Trump continues to put pressure on China with tariff threats, China has a potential route out of the trade conflict that would be extremely detrimental to both countries as they have an option to open new trade connections to Asia, Africa, and Europe. Plans are surfacing that China could possibly devalue the Yuan as a weapon in the current trade war. China’s president Xi has announced plans to further open up the Chinese economy by significantly lowering tariffs for autos and other products. Xi’s address was seen as positive for markets with him saying China does not seek a trade surplus and has a desire to increase imports. Markets turned to favour risk and the New Zealand Dollar (NZD) and other risk products are significantly bullish late Tuesday. Read more

Market Overview:

The long Easter weekend made for quiet markets, Equities and Commodity markets were both closed Good Friday. FX markets ticked along behind the scenes while in thin trading conditions. Trade talks between the US and China continued dominating the news as a potential for an intl “trade war rises. Initially President Trump was open to negotiations earlier last week bringing risk to the table and giving markets initial optimism. This was soon transposed as buyers sought the US Dollar (USD) and safe haven investments with fresh discussions spooking markets again. President Trump highlighted he was not going to be an easy target initially announcing he was to tariff over 60 Billion worth of imported Chinese products on March 22. China retaliated punishing American Foods, wine, fruits and frozen pork with their own 25% tariffs on around 128 products. This is in direct response to what President Trump calls intellectual property theft with technology transfer policies requiring companies to share technology with Chinese companies to have business interests in China. President Trump claims these rules in place are unfair and allow the China government to abuse American technology. Where it could get super ugly is if the recent moves could push China to introduce taxes on American firms which rely on Chinese manufacturing to keep costs down, as we know wages in china are lower than they are in the US. This week we should see further cages rattled but suspect that China may be interested to calm things down with a proper meeting rather than continue with mudslinging. This week should see plenty of volatility also with the Reserve Bank of Australia (RBA) announcing their cash rate later today and US Non-Farm Payroll at the end of the week. The US Dollar index should continue to trade above the 90.00 handle unless we get a correction lower based on renewed risk sentiment. Read more