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Howard Wilcox

Market Update

Day 23-  Level 2 NZ lockdown.

Worldwide coronavirus cases surpasses 6,400,000 with over 380,000 deaths officially reported.

A string of terrible American data releases has worn down the US Dollar recently with the US Dollar Index falling to below 98.00 Wednesday. Unemployment numbers continue to rise with another 2.1M people filing for unemployment. Prelim GDP for the first quarter 2020 was down -5.0% and the University of Michigan Consumer Sentiment index took a hiding. Equity gains in Europe extended to US markets despite the ongoing trade tensions between the US and China and civil unrest from the death of George Floyd. Risk sentiment has been unfaltering, improving sharply Friday after President Trump’s threats to China regarding the situation in Hong Kong. Poor vaccine trials are also hitting the wires but have had little effect on the rise of the New Zealand Dollar and the Australian Dollar over the past few days. It could be said that with only 1 person in NZ recovering from the virus at the moment and very few new cases out of Australia both countries are starting to be seen as safe haven assets. Further unrest in the US with Trump threatening to mobilise the National Guard to confront protesters, and general wide scale unemployment with alarming numbers of new coronavirus numbers should see market conditions and sentiment remain low in the USA for a while with a US recovery looking a long way off. 

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Markets Update

Day 10-  Level 2 NZ lockdown.

Worldwide coronavirus cases surpasses 5,900,000 with over 361,000 deaths officially reported.

New Zealand Job numbers fell by a record 37,500 in April showing the fallout of lockdown throughout most of April and the impact of Covid-19. This represents the largest drop since records began in 1999. The biggest decline was in the service and primary industries with significant drops in accommodation and food services. The alarming aspect of these numbers is that we won’t know the true extent of the damage to the economy until well after the wage subsidy ends with a further dire outlook to transpire. In recent weeks we have seen many large companies chop jobs such as Air New Zealand, Fletcher Buildings, Sky City and Copthorne Hotels with the Reserve Bank of New Zealand expecting the unemployment rate to top out at 10.0% by the end of 2020.

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Ian Dobbs

Market News

Day 10-  Level 2 NZ lockdown.

Worldwide coronavirus cases surpasses 5,500,000 

Quiet start to the week with national holidays in both the US (Memorial Day) and the UK (May Day Bank holiday) with currencies trading in narrow ranges.

With little in the way of data releases over the week attention will focus on the gradual reopening of US and European economies and concern over the rising tensions between China/US which appears to be heading towards a full scale trade war.

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Direct FX

FX Update

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Day 6-  Level 2 NZ lockdown.

Worldwide coronavirus cases surpasses 5,000,000 

New Zealand’s growth rate (GDP) is forecast to decline from the 2.8% year ending June 2019 to -4.6% to the year ending June 2020. This is driven by a massive fall in the second quarter 2020 coronavirus fuelled downturn of somewhere around 20.0%. The RBNZ are forecasting growth to return into the positives in the 3rd quarter (September) 2021. So that’s 5 economic quarters we could see the New Zealand Economy weighed down by the virus implications before a proper recovery. Unemployment is expected to rise to over 8.0% in the June quarter 2020 peaking around 10.0% in the 3rd quarter 2021. This is in comparison to Australian economic growth (GDP) which is expected to decline by around -12.0% in the June 2020 quarter followed by -7.0% in the third quarter and -6% in the fourth quarter 2020. A rebound of 6.0% growth is forecast in the third quarter 2021. Australian Treasury Secretary Kennedy said when asked about an Australian recession- “we’ve gone well past” a recession. I’m not sure if he is looking at the same balance sheet with Australia expected to formally slip into recession later this year.

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Covid-19

Successful Covid-19 vaccine trials lifts mood

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Day 6-  Level 2 NZ lockdown.


Worldwide coronavirus cases nears 5,000,000


Markets Monday entered the week feeling optimistic about global economies with equity markets pushing higher and risk currencies reversing from recent lows. News of a potential coronavirus vaccine stoked a fresh bull mood as company Moderna reported positive “phase one” results for a potential Covid-19 vaccine. All 45 of the trial participants developed coronavirus antibodies.

US Fed chairman Powell spoke Monday suggesting US Unemployment will be somewhere in the range of 20-25% at its peak. If the economy is to recover fully from the fallout of Covid-19 we might need a vaccine. Powell said there are a lot more options he has at his disposal to tweak the current lending program to support the economy.  

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RBNZ

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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