FX NEWS

  • Worldwide coronavirus cases surpass 116.18 million with over 2.57 million official deaths
  • Day 5 for Aucklanders in lockdown level 3 today, expected to last for 7 days through to Sunday morning 
  • Overnight equity indices fell, and the USD moved higher, the Federal Reserve reaffirming their stance overnight for a continued “easing” policy
  • NFP predicted to come in 225k compared to the 190k predicted
  • Japan’s government wants a 2 week extension of the Tokyo state of emergency
  • A magnitude 8 earthquake in the Kermadec island area off the coats of NZ has led authorities to issue a tsunami warning

NZD and AUD come off recent highs

Market Overview

  • Worldwide coronavirus cases surpass 114.96 million with over 2.549 million official Deaths.
  • Day 3 for Aucklanders in lockdown level 3 today, expected to last for 7 days through to Sunday morning.
  • Overnight equity indices rise, surge risk products higher. With the Federal Reserve reaffirming their stance on accommodative policy the bond markets are not so sure
  • RBA Boosts their bond buying by 3B.
  • Japanese Jobless rate for January comes in at 2.9% after 3.0% was expected.
  • RBNZ’s Hawkesby said the central bank is committed to prolonged stimulus and will cut the cash rate if needed- saying the economy in NZ is uneven and fragile.
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FX News

The Reserve Bank of New Zealand has left its Large Scale Asset Purchase Program, at NZD $100B Wednesday, while keeping the cash rate unchanged at 0.25%. The RBNZ said in their statement they will maintain its stimulatory policy until inflation is sustained at the 2.0% target point. The work required to accommodate negative rates is now done although the RBNZ is very unlikely to cut rates again in this cycle. Having said that the RBNZ is willing to add further stimulus if required but it looks increasingly like a long shot that it will be necessary. Increases to the cash rate look to be a long way away possibly late 2022 depending on inflation as mentioned. From now over the following months, the RBNZ spoke of uncertain times ahead, relative to how the global community reacts and recovers based on coronavirus vaccine rollouts. 

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Howard Wilcox and Neven Fisher

Risk Currencies Surge Higher

• Worldwide coronavirus cases surpass 112.1 million with over 2.48 million official
Deaths.

It was good to see a bit of excitement in the New Zealand Dollar develop Monday after a slow 2 to 3 weeks of little movement and benign economic activity. The kiwi climbed out of its recent range posting 0.7340 against the greenback, an early April 2018 level and looks poised to click higher. S&P (Standard & Poor’s) credit agency raised the New Zealand Credit rating from AA to AA+ saying the economy is recovering quicker than most other countries attributed to containing the virus well. S & P said they expect fiscal indicators to remain over the next few years and GDP to grow to about 3.2% between 2022 and 2024. This would be some effort as New Zealand hasn’t been able to achieve this since January 2019.

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Markets in Consolidation Mode

  • Worldwide coronavirus cases surpass 110.7 million with over 2,447,000 official deaths.

Markets are heading into the close of this week in consolidation mode with all eyes on longer-term interest rates. US 10 and 30yr yields lead the move higher this week breaking through significant levels and eventually trading to their highest levels in over 12 months. The rising bond yields eventually began to weigh on US stocks with indices trading to a two-week low overnight. Bond yields are rising as investors are upgrading their outlook for economic growth and inflation. Biden’s $1.9trn stimulus plan is helping to underwrite those expectations. Most economists and central banks believe any uptick in inflation will only be temporary, but with all the money creation that’s occurred in the world over the past year, it worth considering the risk that inflation may not be as transitory as the experts believe. 

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Positive risk sentiment drives markets

Worldwide coronavirus cases surpass 109.6 million with over 2,417,000 official deaths.

Generally positive risk sentiment over the past week has been evident in the markets as a reflation narrative gathers pace helped by the global vaccine rollout and expectations of US fiscal stimulus. Bond yields in Europe and the US have been moving higher, trading to levels not seen since September last year. US 10-year yields have moved above 1.20% while 30-year yields are now above 2.00%. Stock markets are also pushing higher along with energy markets.

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