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Howard Wilcox and Neven Fisher

US Holiday subdues currency markets in leadup to NZ Election

Worldwide coronavirus cases surpass 38 million with over 1,084,000 official deaths.

US holiday Monday with Columbus Day made for a slow start to the week. 

We are just four days away from the general election in New Zealand on the 17th October. There are no economic announcements locally this week so movement will be in inches not feet. Traditionally around election time financial markets tend to not react a whole lot. With polls suggesting a return to power for the Labour Party and the Greens the likely coalition partner we may not get too many surprises. Markets tend to be way more volatile in a situation where another scenario presents itself. Of course the Labour party could also govern alone. If coalition negotiations take a while to conclude we could also see markets bounce around depending on the outcome. Over the past election results we have seen the kiwi react positively to a National led government and negative to a Labour government, we shall see.  

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FX News

Economic Releases

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Tuesday 13/10

  • All Day, USD, Bank Holiday
  • All Day, CAD, Bank Holiday

Thursday 15/10

  • 1045am, AUD, RBA Gov Lowe Speaks
  • 130pm, AUD, Employment Change
    • Forecast -35.0K
    • Previous 111.OK
  • 130pm, AUD, Unemployment Rate
    • Forecast 7.10%
    • Previous 6.80%
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FX Update

Worldwide coronavirus cases surpass 36.7 million with over 1,066,000 official deaths.

Midweek risk appetite turned soft following comments by President Trump via twitter regarding the 2016 election involving Russian interference and rather importantly, no stimulus package until after the 2020 November election. Trump said to the media “I have been instructed by my representatives to stop negotiating until after the election”. The comments sparked a sell off in equities as the kiwi and Aussie currencies fall away sharply. The confusion over the potential stimulus package then took a U turn with Trump confirming he would in fact support targeted relief early during Thursday sessions in the form of individual stimulus to airlines of $25 Billion payroll support and another round of $1,200 to all American taxpayers. Markets again changed course with risk assets recovering losses, the kiwi lifting across the board. 

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Prospects of a US fiscal agreement supports risk

Worldwide coronavirus cases surpass 35.6 million with over 1,045,000 official deaths.

New Zealand will ease coronavirus levels in Auckland back to level 1 in line with the rest of the country later this week. New Zealand has had no new viruses since September 25th with only 34 cases in managed isolation and no-one currently receiving care in hospital. 

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Direct FX

Economic Releases

Monday 05/10

  • All Day, CNY, Bank Holiday

Tuesday 06/10

  • 3am, USD, ISM Non-Manufacturing PMI
    • Forecast 56.3
    • Previous 56.9
  • All Day, CNY, Bank Holiday
  • 430pm, AUD, Cash Rate
    • Forecast 0.25%
    • Previous 0.25%
  • 430pm, AUD, RBA Rate Statement
  • Tentative, AUD, Annual Budget Release
  • 935pm, EUR, ECB President Lagarde Speaks
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FX News

FX News

Worldwide coronavirus cases surpass 34.4 million with over 1,022,000 official deaths.

Risk sentiment improved overnight with the outlook around a coronavirus stimulus package nearing an agreement from the US government. Certainly, from earlier in the week things have improved contributing to rebound in mood with equities and risk products receiving support. We’re not quite out of the woods yet but investors are feeling a lot more positive. For months the senate has been against further economic relief, US Senate leader McConnell has said that if Pelosi and Mnuchin agree on a deal they will “take a look” with both Republicans and Democrats wanting to lock in a relief deal prior to the US Elections. Price action has seen a drop in buyers exiting the safe haven greenback putting it under pressure. This has been the main item driving global currencies over the week.   

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FX Update

Worldwide coronavirus cases surpass 33.5 million with over 1,005,000 official deaths.

The New Zealand Dollar has been camped out around 0.6550 versus the greenback in trading this week as markets wait for directional cues. Equity markets surged back, recovering most of last week’s losses with the DOW, Nasdaq and S&P all up over 1.5% this morning. Usually we would see a push higher in the NZD but with recent RBNZ dovish comments around economic uncertainty this has left the kiwi struggling to stay at current levels across the board. Last week’s RBNZ Monetary Policy review never highlighted any surprises. Holding interest rates unchanged at 0.25% and also maintaining the current level of the asset purchase programme. The central bank re-confirmed that all options are still on the table if needed including bringing in negative interest rates and or bank funding for lending schemes or possibly the purchase of foreign asset purchases. Any action won’t be taken until early 2021 however.

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Economic Releases

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Tuesday 29/09

  • 145am, EUR, ECB President Lagarde Speaks

Wednesday 30/09

  • 2am, USD, CB Consumer Confidence 
    • Forecast 90.0
    • Previous 84.8
  • 1pm, CNY, Manufacturing PMI
    • Forecast 51.3
    • Previous 51.0
  • 720pm, EUR, ECB President Lagarde Speaks
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FX Update

Worldwide coronavirus cases surpass 31.8 million with over 974,000 official deaths.

Currency markets head into the closing stages of this week in a “risk off” mood. Declining US stock markets are weighing on risk assets across the board and as such the NZD and AUD have seen pressure. Broad USD strength has also played a significant role in the Australasian currencies recent declines and the losses have been significant. Both the NZD and AUD have lost around 250 points vs the USD over the past week. 

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RBNZ

RBNZ in Focus

Worldwide coronavirus cases surpass 31.2 million with over 964,000 official deaths.

Currency markets have been in a holding pattern after a week of consolidations. Equity markets are trading around where they were a week ago while currencies have been confined to recent ranges after a flood of central bank meetings including the Federal Reserve decision. Risk markets were up and down with mixed economic date announcements out of Australia. Some crosses look to be trading the opposite to expected directions- the AUD one of them. The Japanese Yen also which is seen as a “safe Haven” currency to park money when things aren’t so rosy ended up the strongest currency even though markets generally traded through pockets of positivity.

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