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FX Update

Worldwide coronavirus cases surpass 24.6 million with over 835,000 official deaths.

Auckland coronavirus lockdown (level 3) has been extended to August 30th 

I’m wondering about the discrepancies between “real data” and what’s actually happening in the US at the moment. It seems headlines and economic data announcements are highlighting major disparities. Hopes of vaccines, progress in the US/China trade negotiations and improving industry is painting an unrealistic picture of an economy rising from the ashes. In my opinion- it’s simply not and has a very long way to go before we see any sustainable “recovery”. Over the past couple of days we have seen equities rise boosting commodity related products and risk currencies such as the kiwi and Aussie – this off the back of “feel good”. For example, Durable Goods Orders for July increased by 11.2% easily beating estimates of 4.4%.

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Jackson Hole in Focus

Worldwide coronavirus cases surpass 23.8 million with over 814,000 official deaths.
Auckland coronavirus lockdown (level 3) has been extended to August 30th 

US indices closed higher on Friday to end a record week for stocks, in particularly the S & P 500 and NASDAQ. The S&P is sitting at a record closing high of 3,431 The Nasdaq also closed at a record high at 11,379. Contributing factors which helped markets reach fresh highs were US Manufacturing which hit its highest level in 19 months, while services reached the highest levels in 17 months. Home Sales for July saw a m/m spike of 24% with the average selling price for homes also hitting an all-time high jumping to US $304,100. This week on the economic calendar sees a lack of significant data releases which should have market participants dial in on global issues and coronavirus headline events.

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Economic Releases

Monday 24/08

  • 1045am, NZD, Retail Sales q/q
    • Actual -14.60%
    • Forecast -16.30%
    • Previous -1.20%

Wednesday 26/08

  • 2am, USD, CB Consumer Confidence
    • Forecast 93.2
    • Previous 92.6
  • 130pm, AUD, Construction Work Done q/q
    • Forecast -6.50 %
    • Previous -1.00 %
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FX Update

Worldwide coronavirus cases surpass 22.84 million with over 796,000 official deaths.

US Dollar safe haven buying was back on the agenda Thursday after the Federal Reserve Minutes released. The Federal Reserve released minutes from the July 28th meeting acknowledging officials expected greater support in the fight for economic recovery from Covid-19. The Fed believed the economy should return to normal over the next “few” years- hinging on optimism that additional measures by the government with efforts to support incomes and spending. The minutes showed that subtle changes from the previous minutes highlighted the willingness of fed participants to “sharpen” their policy at the next meeting on September 15th. There was little objection from members that the pandemic would continue to weigh heavily on the economic outlook with risks in employment and inflation the greatest concerns.

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Markets Await Directional Cues

Worldwide coronavirus cases surpass 22 million with over 774,000 official deaths.

NZ has postponed its national election by 4 weeks to the 17th October. 

Markets went into the weekend trading flat, not really bothered about attacking any one direction, risk conditions were subdued. The weekly winner was the Canadian Dollar, by far the strongest currency outperforming its main peers based on a pickup in data and higher crude prices. The Weakest currency was the New Zealand Dollar edging out the Japanese Yen based on a recently dovish RBNZ. Coronavirus still occupies headlines around the world with the virus still unable to be contained in many countries. In the US they are still averaging over 50,000 new cases every day. NZ has a fresh outbreak with authorities stretched to limit further spreading into the wider community. 

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FX News

FX Update

Worldwide coronavirus cases surpass 21.08 million with over 753,000 official deaths.

New Zealand has locked down Auckland after a run of 102 days without community infection. Auckland recorded 4 new community spread cases Wednesday of coronavirus, locking down the city for 3 days from midday Wednesday. The 4 cases are all from the same family. Prime Minister Ardern was swift to bring in level 3 late Wednesday night with the rest of NZ in lockdown level 2. The issue authorities have is the 4 new cases are from an unknown source and work is being done to trace where the virus originated. New Zealanders will find out later today if the country/Auckland will stay in level 3 lockdown or go into a stricter level 4 from tomorrow. Meanwhile National leader Judith Collins has called for the 19 September election to be postponed due to new outbreak concerns.


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RBNZ Announcement

The Reserve Bank of New Zealand kept the Cash Rate unchanged at 0.25% today and increased its asset purchase program. The (LSAP) Large Scale Purchase Program has been expanded from 60 Billion to 100Billion NZD. Buying more LSAP enables the RBNZ to keep downward pressures on wholesale and retail rates. This is a significant boost as estimates had been between 75B and 90B. The RBNZ also agreed that additional monetary instruments remain active such as the deployment of negative interest rates and possible purchase of foreign assets. Implementing these tools will depend largely on the outlook for inflation and employment. 

Direct FX

RBNZ In Focus

Worldwide coronavirus cases surpass 20.23 million with over 737,000 official deaths.

The US economy added 1.8M jobs in the month of July, indicating a recovery of sorts even though they have experienced a surge in coronavirus over the summer months. The 1.8M was slower than the prior two months when roughly 2.5M in May and 4.8M in June were added with many states lifted coronavirus lockdown restrictions. The official unemployment rate fell to 10.2% after peaking at 14.7% in April highlighting people are returning to work with the greatest number of people returning to the hospitality, retail, government and Health Care sectors. This marks a fairly decent rebound but following a hefty downturn which skews the figures somewhat. It will still take until 2022 for the economy to fully recover according to reports, depending on how quick a vaccine is introduced to the masses. Remembering the US economy was at its lowest unemployment rate of 3.5% in 50 years pre coronavirus. The US economy entered a recession in February and has shown a decent comeback as early as April, but the speed of the ongoing recovery will depend on the course of coronavirus. The government wage subsidy of $600.00 per week expired at the end of July and congress has not managed to agree on its next steps, although President Trump has over the weekend signed presidential orders to expand the unemployment benefit scheme, defer taxes and provide student loan relief.

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Economic Releases

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Monday 10/08

  • All Day, JPY, Bank Holiday

Wednesday 12/08

  • 2pm, NZD, Official Cash Rate
    • Forecast 0.25%
    • Previous 0.25%
  • 2pm, NZD, RBNZ Monetary Policy Statement
  • 2pm, NZD, RBNZ Rate Statement
  • 3pm, NZD, RBNZ Press Conference
  • 6pm, GBP, Prelim GDP q/q
    • Forecast -20.50%
    • Previous  -2.00%
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