This Week’s Top Stories

Key Points:

  • Worldwide coronavirus cases surpass 165.553 million with over 3.430 million official deaths.
  • UK Inflation printed as expected at 1.5%y/y, up from the prior 0.7%.
  • US Federal Reserve Bank minutes suggest that some members believe the central bank should start talking about a plan to taper asset purchases. 
  • NZ budget today at 2pm local time isn’t expected to have a big impact on the markets. 
  • Australian employment data is set for release in the next hour with expectations of a gain of 17.5k and the unemployment rate to be unchanged at 5.6%.
  • Crypto currencies remain volatile with Bitcoin falling over 70% in the last two weeks, then recovering 20% from overnight lows of 29,700 to 39,800.

US Data Disappoints

Market Overview

• Worldwide coronavirus cases surpass 164.262 million with over 3.403 million official deaths.
• Chinese April’s Industrial Production is up 9.8% y/y and Retail Sales is up 17.7% y/y a slight miss on the 25.6% predicted but steel production remains extremely high.
• US Retail Sales was weaker in April coming in at 0.0% following a 9.8% rise in March. This was predicted after the March led stimulus surge.
• US Industrial Production and Manufacturing rose 0.7% for April versus the 0.9% consensus with the mining indexes increasing 0.7% and the utilities increasing by 2.6%
• ANZ predict the Reserve Bank of New Zealand will start hiking interest rates again in August 2022 and to 1.25% by the end of 2023. Read more

FX

Economic Releases…

Tuesday 18/05
1:30PM, AUD, Monetary Policy Meeting Minutes

Wednesday 19/05
6PM, GBP, CPI y/y
Forecast 1.40%
Previous 0.70%

Thursday 20/05
12:30AM, CAD, CPI m/m
Forecast 0.20%
Previous 0.50%
2:30AM, USD, Crude Oil Inventories
Previous -0.4M
6AM, USD, FOMC Meeting Minutes
1:30PM, AUD, Employment Change
Forecast 20.3K
Previous 70.7K
1:30PM, AUD, Unemployment Rate
Forecast 5.60%
Previous 5.60%
2PM, NZD, Annual Budget Release Read more

Ian Dobbs

This Week’s Top Stories

New Zealand House prices remained buoyant in April with data showing the National medium at 810,000, slightly down from March’s 825,000. Auckland is still showing signs of cracking on with things rising to 1,125,000 from March’s 1,120,000 values. Nationally 26.8% higher at the same time last year. Sales in April compared to March are down 28% which is a true signal confirming the heat in the market is coming off. Recent government tax changes to investment properties hasn’t yet affected prices, we expect this to slowly impact values over the coming months as the overinflated market softens. Read more

Record Highs and disappointing jobs data

Market Overview

• Worldwide coronavirus cases surpass 159.593 million with over 3.317 million official deaths
• Non-Farm Payroll missed its mark by some margin Friday after jobs in the workforce diminished in April. Payrolls were expected to rise by 990,000 people but instead the number was reported as only 266,000 indicating tough economic times. This could give the Federal Reserve further confirmation to continue with an accommodative stance. The problem being recent fiscal stimulus could be acting as a deterrent for people to seek work or could it actually be a sign of a slower than anticipated labour market. We won’t really know until a trend develops, figures for May should reflect this. Read more

What’s Moving Markets?

As economic demand bounces back in the US this should cause inflation to rise. Many expect the Fed to reduce the size of its asset purchasing program soon. Buying bonds is one of the products a govt uses in order to keep interest rates low, maintain growth and keep an economy from deflating when times are rough and growth is slow. A move to decrease the value of government bonds would raise yields and have a flow on effect to equity markets making them less attractive relative to buying bonds. So as equity markets devalue so do risk products including the commodity driven New Zealand Dollar. Our Autumn and Winter months are historically not big moves for rises in US stocks thus we view selling pressures could be on the horizon for the kiwi over the coming months. Read more

Currencies Consolidate Ahead of a Busy Economic Week

Market Overview

• Worldwide coronavirus cases surpass 154.173 million with over 3.226 million official
Deaths.
• UK Bank Holiday Monday “May Day” created thin liquidity in markets.
• India’s wave of coronavirus infections has been described by WHO’s Director General as “beyond heart-breaking”- India’s new cases rose by 368,147 Sunday bringing the total to 19.3M cases and 218,959 known/recorded deaths.
• Fed’s Moody has revised up GDP growth for 2021 to nearly 7% and to over 5% in 2022. He also puts the first rate hike into 2024.
• Germany reports 9,160 new coronavirus cases in the Monday update.
• The US Dollar is typically strong in May- its best month with the currency rising in 9 of the last 11 years.
• The FDA is set to approve the Pfizer vaccine for use on people between the ages of 12-15 over the next week.
• As India’s coronavirus numbers continue to soar, there are calls for a national shutdown to fight off further infections and deaths. Read more

Economic Releases

Monday 03/05
All Day, JPY, Bank Holiday
All Day, CNY, Bank Holiday
All Day, GBP, Bank Holiday

Tuesday 04/05
6:20am, USD, Fed Chair Powell Speaks
All Day, JPY, Bank Holiday

Wednesday 05/05
10:45am, NZD, Employment Change q/q
Forecast 0.30%
Previous 0.60%
10:45am, NZD, Unemployment Rate
Forecast 4.90%
Previous 4.90%
11am, NZD, RBNZ Gov Orr Speaks
All Day, JPY, Bank Holiday
All Day, CNY, Bank Holiday
1:10pm, NZD, RBNZ Gov Orr Speaks

Read more

Risk products turn softer as markets eye tomorrow’s Fed decision

Market Overview

Risk sentiment deteriorated towards the end of the week as President Biden’s Capital Gains Tax hit the wires. The increase to capital gains tax from 20% to 39.6% of all income over $1M earned was initially seen as a kick in the guts to the wealthy, and it is. However, it was explained that only a very small percentage of people- just 0.3% will actually be affected. This in turn brought about US Dollar demand taking the NZD lower broadly. All time record highs in US equity indices extended from Friday highs taking the Nasdaq to 14138.78 and the S&P to 4187.74. The DOW Jones Index lagged, closing lower at 33981 from 16th April’s all time high at 34200. In true risk fashion as risk products benefited so did the New Zealand Dollar as it climbed to 0.7242 against the greenback into Monday trading. The last time we saw a daily close above the 0.7300 zone was back in April 2018. This is certainly a level to watch. Read more