Market Overview:

The new Reserve Banks governor Adrian Orr starts his new job today.
He becomes the 12th governor of the Reserve Bank taking over the Grant Spencer who has been relieving in the role since late last year. Adrian Orr is 54 years old and has will become one of the most influential people in New Zealand with the say over interest rate and loan decisions. He past positions include the head of economics at the RBNZ and over the past 10 years has been Chief Executive of the N Super Fund. He comes on board with a reputation of not mincing his words and will call a spade a spade but will be entertaining. His boldness may get him into trouble with financial markets if he comes across blunt, as sensitive as the markets are he could turn the NZ Dollar in a heartbeat. Finance Minister Grant Robertson and Adrian Orr signed a new (PTA) Policy Targets Agreement Thursday outlining specific targets for price stability and employment, this sets out the provisions of the Reserve Bank Act 1989 over his full 5-year term as governor. US/China trade talks have been dominating headlines with President Donald Trump seeking a to narrow the US Trade Deficit with China by one third. He is looking for a 100B reduction in the US trade deficit, the US had a 337B trade shortfall in goods and services with China last year. We have seen risk appetite return to the markets Monday with most currencies trading higher on the back of positive news with negotiations now taking a cooperative tone. Big Thursday largely became a fizzer based on a lack of movement across the board. The RBNZ kept rates on hold as was widely expected and the Federal Reserve hiked to 1.75% from 1.5% with the Fed chairman Powell highlighting that policy will need to be tightened further, gradually through 2020 as the economy goes through a growth period of inflation nearing 2.0%. Equity markets closed the week on losses with the DOW and the Nasdaq both down over 2%. The US Dollar Index is lower as well back under 90.00 to 89.48 as markets sought risk currencies. In other news Facebook has 100B wiped off the share value in the last 10 days as Cambridge Analytica answers questions on how 50 Million Facebook users got into their hands to assist Trump win his Presidential campaign. Good Friday holiday will see a shortened week in financial markets with only a few key economic announcements of note. Read more

Australia

The Australian Dollar (AUD) has largely been range bound over the week against the major pairs lacking any real direction. The US FOMC rate meeting Thursday morning saw the Australian Dollar move north against the US Dollar (USD) coming off a 3 month low of 0.7660 through to 0.7760 on a surging Dollar (USD). At the latest RBA meeting minutes the Reserve Bank of Australia said they are concerned about high household debt and less than favourable wage growth. The RBA are likely to keep interest rates on hold for some time in an effort to lower unemployment and lift inflation. Aussie (AUD) unemployment figures Thursday came in benign at 5.5% based on expectations of 5.6% with 17,500 people adding to the workforce over the month of February. Still, underemployment remains key for RBA policy makers heading into the next few months.

New Zealand

The RBNZ left rates unchanged as expected at 1.75%. It was the last announcement for Acting Governor Grant Spencer as his term ends on the 26th of March. Governor Adrian Orr begins on 27th March. Comments from the RBNZ meeting included; Monetary Policy will remain accommodative for a considerable time, long term inflation expectations will be fairly anchored at 2%, house price inflation remains moderate with weak house price sales, CPI inflation is expected to weaken in the near term due to soft energy and food prices. The Fed Rate stole the show earlier in the morning with a hike from 1.5% to 1.75% as Powell was generally “neutral in his speech but hinted at more hawkishness at a later date. The New Zealand Dollar (NZD) pushed off its low of 0.7150 on the Fed rate announcement to 0.7235 and stood its ground on the RBNZ announcement happy to stick around 0.7230. In other news dairy prices fall 1.2% at the recent global dairy auction dropping to USD 3,632.00 per tonne across all products. Markets were expecting another drop lower by 0.6% but the figure is the 3rd consecutive fall after 3 positive auctions earlier in the year. Read more

Market Overview:

The US Dollar continues to strengthen despite political uncertainty.
Vladimir Putin has won a landslide victory election, he has hinted this would be his last term as president. Cementing his rule over Russia for another 6 years. He has secured 75% of the vote. Incredibly his total time as President will be 25 years on 2024, he will be 71 years old. The only President to rule longer is Joseph Stalin. The initial targeted voting was expected to be 70% – this turnout looks like it will significantly above this. South Korea’s foreign minister has said the North Korea’s leader Kim Jong Un has “giving his word” for the potential denuclearisation at the pending summit in May. In a bizarre turn of events Kim Jong Un said he was committed to scraping North Korea’s nuclear weapons and missile testing plans, surely he won’t give up his rights here without a fight for something else? The US Dollar has been under pressure for most of March due to political uncertainty but looks to be turning a corner with economic data continuing to improve. This week we will see the Federal reserve more than likely raise rates but what will keep things interesting is the clues as to how many hikes we will likely see through to the end of the year. With the market expecting 3 hikes, the market will no doubt view any hawkish tone for a possible 4th hike and subsequently lift the US Dollar (USD) higher. In contrast the RBNZ could be dovish Thursday when they announce their Cash Rate and statement, some are predicting a small chance of the cash rate dropping to 1.5% from 1.75%. If this eventuates we could see current NZ Dollar (NZD) levels across the board depreciate reasonably quick. The mostly result however is no change from the RBNZ. The Bank of England will also announce their official Cash rate on Friday with no expectation of any rise above 0.5%, but any hawkish tone in the following announcement may indicate a hike for May’s meeting. Further Brexit talks will continue in Brussels at the end of the week with the transition or implementation period being agreed upon Monday. This will mean the UK will leave the EU on the 29th March next year. The long awaited next phase can start with finalising trade details and future EU and UK relationships post Brexit.  A busy week ahead for financial markets with lots happening to shift markets, with any luck we may see some pairs jump from current ranges.

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Australia

The Aussie (AUD) made gains for much of the week against its main rivals, but in the past 12 hours much of that work has been undone. Fears by the RBA continue around wage growth remaining low with household debt levels high, and this is helping to limit AUD gains. The RBA are still optimistic the economy will progress and improve but it will be on their terms and be very gradual. With better than expected Chinese data out this week- both factory and investment in fixed assets were better than consensus, this gave the Australian Dollar (AUD) a slight boost before falling away sharply on broad risk aversion. Any ongoing trade uncertainty between China and the United States will undoubtedly have a detrimental effect on the Australian Economy and the AUD Dollar (AUD). A quiet week to come locally with only unemployment data to print on Thursday.

New Zealand

The New Zealand Dollar (NZD) remains largely range bound this week. Trading sideways against its main rivals the Australian Dollar (AUD), Pound (GBP), Euro (EUR) and the US Dollar (USD). Tuesday RBNZ Spencer about the role of “macro prudential policy and its effects on housing related risk with housing market pressures and uses the policy has with the current environment of low interest rates, the effect on the NZD was minimal. The country’s current account was also released Midweek and was lower than the expected -2.45B with -2.77B printing. The expectation on the New Zealand Dollar (NZD) was seen to be negative by market participants but strangely the kiwi carried on edging up through 0.7330 during local trading against the greenback. A risk averse market followed after President Trump’s announcement that he had sacked the Secretary of state Rex Tillerson with the NZD falling across the board. GDP published Thursday at 0.6% growth as opposed to 0.8% expectation, interestingly the hot summer weather was to blame for this having a negative effect on agriculture production which fell 2.7%, the news choking the New Zealand Dollar (NZD) lower. We expect the NZD to remain well bought over the next while. Read more

Market Overview:

NZ to seek an exemption to the Steel tariffs. The EU’s top trade officials say they have no clarity on President Trump’s plans on trade tariffs, as his decision to slam hefty tariffs on steel and aluminum builds pressure. Trump posted on twitter- “The European Union, wonderful countries who treat the US very badly on trade, are complaining about tariffs on Steel and Aluminum”, If they drop their horrific barriers and tariffs on US products going in, we will likewise drop ours”. Playground behaviour one would think?!. The President is set to meet Korean dictator Kim Jong Un with many US national security experts suggesting this could end up being a big mistake given the two personalities. In other US led news the Florida Governor has signed off on new gun laws including raising the minimum age to purchase a gun to 21 and extending the waiting period to 3 days. This is the boldest laws made in the state in decades and comes just 3 weeks after the Parklands school shootings. We await other states to follow suite with Illinois and Vermont thinking about with the NRA in damage control filing a lawsuit immediately after the Governor’s announcement. The US Dollar is up slightly over the week with the index breaking back above 90.00. This week will be hard to read as a “risk on” or “risk off” market so direction will be tough accordingly. If equities continue north this could be a sure bet high yielding risk currencies such as the Australian Dollar (AUD), New Zealand Dollar (NZD) and the Canadian Dollar could trade well this week. There are continued calls for a second Brexit ballot. Brexit polls are still close with “remain” still slightly ahead by 51% to 49%, the problem is as things draw closer to the actual date those that have not chosen to vote or the undecided bunch would now more than likely vote to stay/remain than leave, this suggests that any second ballot outcome would depend largely on who actually votes. NZ quarterly GDP prints Thursday.  Read more

Australia

The Australian Dollar (AUD) strengthened on the RBA announcement Tuesday. Leaving the Cash rate at a record low of 1.5% the RBA remains optimistic regarding growth and rising inflation. Lowe said a lower unemployment rate and low interest rates will give weight for the next move will be upwards, not down, but overall market economists are expecting 2019 to be a more productive year. GDP released weaker than expected soon after and took the Aussie (AUD) off its highs to 0.7770. Monthly Trade Balance figures were released Thursday at 1.06B from expectations of 0.21B nudging the Aussie to a fresh high of 07830.

New Zealand

The New Zealand Dollar (NZD) pushed off lows over the week as risk returned to the markets. US President Trump acknowledged possible progress with North Korea after word that they were willing to negotiate its stance on nuclear weapons. Markets reacted positively squeezing the New Zealand Dollar (NZD) half a cent higher against the greenback up over 0.7300. The Global Dairy Auction this week showed dairy prices dipped -0.6% to reach an average of 3,593.00, clearly a blow to milk producers as the farm gate milk price sits at 6.40 with expectation of this going higher later in the year. No further local date to be released over the rest of the week, we can expect plenty of the usual volatility around Non-Farm Payroll early Saturday morning. Read more

Market Overview:

This week should prove to be interesting as the market digests the results from the weekend’s Italian election, the final make-up of the German government after 5 months in limbo and the apparent enthusiasm for a trade war by the US President. There are also interest rate decisions by Central banks for Australia, Canada, Japan and Europe as well as a raft of economic data for the US culminating in the crucial Non-farm payroll data on Friday night. President Trump initiated the stage for a trade war last week by slapping tariffs on steel and aluminum imports, daring other countries to retaliate which led the European Union head Juncker, to warn that it would target iconic American brands of Harley Davidson motorbikes, Levi Strauss & Co. jeans and bourbon whiskey from the U.S. In retaliation, the U.S. president put the European auto industry in his cross hairs. Juncker’s threat heightened the prospects of a global free-for-all, as the World Trade Organization said the potential of escalating tensions “is real” and the International Monetary Fund warned the restrictions had potential to cause damage to the U.S. and global economy. Read more

Australia (AUD)

The Australian Dollar (AUD) traded to a low of 0.7710 against the USD overnight Thursday the lowest level in 2018 after Thursdays quarterly Private Capital Expenditure published worse than expected knocking the Aussie (AUD) south across the board. Private Capital Expenditure came in at —0.2% vs expectation of +1.0%. On the back of the data estimates for GDP are now getting revised down. President Trump said he would announce trade tariffs next week. A 25% tariff on steel and a 10% levy on aluminum. The US imports over 200M metric tons of steel per year from Australia. With such a bold move its possible Trump may get objections from the World Trade Organisation.

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Market Overview:

Equity markets are trading at new three week highs with the DOW, and the S&P 500 trading sharply higher for the third straight day. The DOW up 500 points on this time last week to 25709 and the Nasdaq to 7414 from 7250. As we reported prices to continue past 25500 last week this is an incredible turnaround from the February low of circa 23400 in the DOW particularly. The US Dollar index trades around the 89.82 zone confirming the US Dollar had a comeback week retracing recent weeks movements over most major pairs. The ECB is currently buying huge amounts of bonds per month and will continue until September 2018. The meeting in March will signal what impact this will have on monetary policy for the rest of 2018 and 2019. The BoE governor Ramsden spoke about the need to raise interest rates faster than anticipated based on accelerating wage growth factors. The Pound (GBP) dropped in value against the cross currencies. Brexit concerns are still a hotly talked about subject with just 6% of small and medium sized businesses saying the Government is not listening to their concerns, businesses are worried about what the implications are, the government must consider this when the next negotiating is done. Read more

Australia (AUD)

The Australian Dollar (AUD) has traded lower over the week coming off last week’s high of 0.7885 to trade as low as 0.7790 Friday morning. FOMC highlighting a hawkish tone early in the week suggesting the US economy was building at faster than expected pace. The Australian Dollar sold early in the week after the RBA hinted they were in no hurry to raise rates based on weaker than expected wage growth suggesting a wait and see style approach. Friday saw Australian Dollar (AUD) turn positive after market participants lost support for the US Dollar, I suspect sentiment of the pace of the “real” US economy may not be as fast paced as one thinks. Next week is a quiet week for local data with only quarterly Private Capital Expenditure due on Thursday. Reasonable levels for buyers of USD if the strength of US Dollar continues. Read more