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FX Update

FX News

Day twenty of the official NZ lockdown.


The NZ Govt could increase the massive stimulus it is dishing out to limit the damage to the economy. Doubling the current spend to 40Billion would almost certainly have the effect of limiting the unemployment rate to ballooning past 10%. Not only that, increasing it to 60 Billion would assist in hastening the NZ economy back to normal times much quicker.


Traders around the globe will be paying attention to coronavirus numbers again this week, as we look for signs that numbers across the globe have peaked. US Dollar demand will come into play as it has over recent weeks with risk sentiment correlating closely to Covid-19 infection result publishing’s.
US Retail Sales and Aussie unemployment figures will be key this week along with Bank of Canada’s monetary policy announcement. 

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International Trade

Economic Releases

Tuesday 7/04

  • 230am, CAD, BOC Business Outlook Survey
  • 430pm, AUD, Cash Rate
    • Forecast 0.25%
    • Previous 0.25%
  • 430pm, AUD, RBA Rate Statement

Thursday 09/04

  • 1130pm, EUR, ECB Monetary Policy Meeting Accounts
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FX News

Market Overview

Day nine of the official NZ lockdown. 

Currencies went from organised to chaotic Thursday but calmed again into Friday sessions.

This virus is extremely good at latching onto people. We are starting to understand the severity of how efficiently Covid-19 spreads. With more than 1million documented cases worldwide it’s become clear based on a recent study that up to 86% of people who contract the virus go undocumented. That is all those who either have no symptoms or mild symptoms and don’t feel the need to be tested. Here lies the problem – it’s these people who will go about their daily activities while inadvertently passing it onto others. In a city called Vo- Italy they carried out an experiment, everybody was tested, with alarming numbers confirming 60% of people were positive and had no symptoms. 

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Ian Dobbs

Kiwi Brushes Aside 0.6000

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It’s business as usual for us at Direct FX- Dealing and Settlement functions are running as per normal. If you need a quote please call or email us.  We would love to hear from you.

There’s a strange calmness in the air – you feel it? No anxiety from industry, no panic to get anywhere, no time constraints, just a lockdown journey of human unification. Time stands still almost, perhaps a moment to smell the flowers, a time for reflection?

Day six of the official New Zealand lockdown. 

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Economic Releases

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Tuesday 31/03

  • 1pm, NZD, ANZ Business Confidence
    • Previous -19.4
  • 2pm, CNY, Manufacturing PMI
    • Forecast 44.9
    • Previous 35.7

Wednesday 01/04

  • 3am, USD, CB Consumer Confidence 
    • Forecast 115.1
    • Previous 130.7

Thursday 02/04

  • 115am, USD, ADP Non-Farm Employment Change 
    • Forecast -125k
    • Previous 183k
  • 3am, USD, ISM Manufacturing PMI
    • Forecast 46
    • Previous 50.1

Friday 03/04

  • 130am, USD, Unemployment Claims
    • Previous 3,283k

Saturday 04/04

  • 130am, USD, Average Hourly Earnings m/m
    • Forecast 0.20%
    • Previous 0.30%
  • 130am, USD, Non-Farm Employment Change 
    • Forecast -81k
    • Previous 273k
  • 130am, USD, Unemployment Rate
    • Forecast 3.80%
    • Previous 3.50%
  • 3am, USD, ISM Non-Manufacturing PMI
    • Forecast 48
    • Previous 57.3

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Howard Wilcox

FX Update

A range of major currencies continue to operate around multi year lows, some multi decade lows with investors scrambling for the safe haven US Dollar. The Australian Dollar was recently at an 18 year low.  

The Reserve Bank of New Zealand will buy NZ 30 Billion in government bonds over the following 12 months (QE program) in efforts to keep interest rates low as the coronavirus impacts the local economy. As the pandemic worsens risk aversion has resulted in stricter credit conditions and reduced the impact of recent interest rate cuts. The RBNZ has changed its mind for the time being on delivering negative rates. While we could still see rates at zero, the plan with QE now is a good one in which we should see increased liquidity/cash flow back into the economy. Jacinda Ardern announced alert level 3 yesterday moving to alert level 4 on Wednesday – Alert level 4 will remain in place for about 4 weeks. Infected cases increased to 102 Monday and to 155 today. Only essential businesses will remain open. The govt will raise the cap on its wage subsidy scheme which will inject a further $4Billion onto the economy over the next 11 weeks. There is an agreement with banks to provide support for people with mortgages and a business finance scheme for businesses for those impacted by covid-19, details of what this looks like will be announced over the coming weeks.  

Death rates continue to publish scary numbers and the health systems are well overloaded in Spain and Italy. More measures will come into place to self-isolate and more borders will close around the world. Japan’s Abe said they are looking at postponing the Olympics – very sad but it must be done as the safety of people cannot be guaranteed.

NZ Alert Level

NZ Alert Level – Dealing Conditions

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The NZ Government has moved to ‘Alert Level 3’ and will go to ‘Alert Level 4’ in the next 48 Hours.
 
This will mean the closure of Non-Essential Business.

Direct FX has made preparations for this well in advance and will implement our contingency plan immediately.
 
All Foreign Exchange services will continue as normal, and our dealers are available on phone (Business Numbers) , mobile and email. We will quote, execute deals and effect payments as per normal business conditions.
 
If any of our clients need any clarification, or have any questions, please feel free to call us or email.
 

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International Trade

Economic Releases

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Below are the weekly economic releases for this week (NZT)

Tuesday 24/03

  • 915pm, EUR, French Flash Services PMI
    • Forecast 39.6
    • Previous 52.5
  • 930pm, EUR, German Flash Manufacturing PMI
    • Forecast 40.1
    • Previous 48
  • 930pm, EUR, German Flash Services PMI
    • Forecast 43
    • Previous 52.5
  • 1030pm, GBP, Flash Manufacturing PMI
    • Forecast 45.1
    • Previous 51.7
  • 1030pm, GBP, Flash Services PMI
    • Forecast 45
    • Previous 53.2

Wednesday 25/03

  • 245am, USD, Flash Manufacturing PMI
    • Forecast 45.1
    • Previous 50.7
  • 10pm, EUR, German Final ifo Business Climate
    • Forecast 87.9
    • Previous 87.7
  • 1030pm, GBP, CPI y/y
    • Forecast 1.60%
    • Previous 1.80%

Friday 27/03

  • 1am, GBP, MPC Official Bank Rate Votes
    • Forecast 0-0-9
    • Previous 0-9-0
  • 1am, GBP, Monetary Policy Summary
  • 1am, GBP, Official Bank Rate
    • Forecast 0.10%
    • Previous 0.10%
  • 130am, USD, Unemployment Claims
    • Forecast 750k
    • Previous 281k

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FX News

FX Overview

Financial Markets continue to take on water, lots of water. The carnage going on out there is seen as biblical with investors not knowing what to do or how to react.

The New Zealand Dollar and the Australian Dollar have come off nearly 7% against the big Dollar this week. The kiwi traded over parity versus the Aussie overnight Wednesday to 1.0005 but was quickly sold back to 0.9930- investors not quite ready yet for the parity party. The English Pound has also sold down 5.4% over the week against the USD as coronavirus cases ballooned out Tuesday, the Loonie (CAD) also down 5.0% as Trump closes down the Canadian Border. 

The high cost by Americans to get tested for Covid-19 is exposing the cracks in the health system with many reluctant to get tested. Eight weeks in there is still not enough test kits available for anyone who needs them. The number of tests per day the US can run is around 7,000 before labs are overrun. 28 Million people excluding the elderly have no health cover in the USA. Uninsured workers will have a greater risk of exposure to the disease as most cannot afford to stop working. US taxpayers will fund the majority of non-insured people who need testing for the virus. US Congress is trying to pass legislation that would require employers to provide paid sick leave during any public crisis. If you have health cover these that are being tested are still ending up with $1,400 style bills after insurance has paid the difference.    

As the virus spreads through 3rd world countries such as India, Bangladesh and Nepal these countries will face massive issues as the ability to carry out testing will be massively limited. With only the sickest to be tested the virus will not be stopped.

It’s a foregone conclusion that the recession in NZ will be deeper than the GFC of 2008 with GDP to decline -3.0% from -2.7% in 2008-2009.  Unemployment is expected to rise above 5.0% with new numbers of unemployed increasing over 40,000 people. We think that the RBNZ will start quantitative easing measures within a week to keep rates low. It is said that banks are in a good financial position and should weather the storm of what’s to come. The only problem is the sheer amount of consumer and business debt and loan defaults which will inevitably happen as unemployment rises and businesses close. 

Jacinda Ardern announced gatherings of 100 people or more have been cancelled. These restrictions do not include Schools, workplaces or supermarkets of public transport. Not sure about others but when I get off my train arriving into work every morning it has over 500 people. The Govt needs to do more, it’s time to ditch the NZ “she’ll be right” attitude and close nearly everything down or our local virus numbers will blow out. Last night’s full border closure announced by Ardern is unprecedented and will go a long way.  

The ECB have announced a 750B pandemic emergency plan. The ECB will buy up Govt Bonds to combat the virus and slow down the effect on the economy. The ECB said the programme which includes all asset categories under the “asset buying programme” will only run until the effects of the coronavirus are under control. The news drove the Euro higher across the board.

The Reserve Bank of Australia cut rates 25 basis points to 0.25% yesterday, Lowe saying he won’t increase again until progress is made towards full employment. The RBA will start buying govt Bonds from today pumping liquidity into financial markets. The new three year funding facility for banks is worth over 90B which is designed at ultimately providing cheaper loans to bank customers. Australia will close its borders to non-residents from 9pm today. 

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