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FX Update

Worldwide coronavirus cases surpases 10.785M with over 517,000 deaths officially reported.

Safe Haven buying midweek was replaced by optimism with positive news out of the US with a trifecta of economic releases. Manufacturing for June bounced higher than expected from 43.1 to 52.6 as the industry formally entered expansionary territory- given it is back above the 50 breakeven threshold. The rise was the largest rise since August 1980. New manufacturing orders were sharply higher along with production increasing from 33 pts to 57.2. Jobs data surged as US firms added more than 2.37M jobs to the economy in June. This is a turnaround from May’s upwardly revised job losses of -3.065M as companies continue to re employ workers and the economy slowly comes back online. US equity markets rebounded with the Nasdaq hitting a record high of 10197 up 1% as news broke that Covid-19 vaccines by companies BioNTech and Pfizer were making progress. Both companies and their experimental vaccines have generated neutralizing antibodies at a higher rate than other placebo receivers recovering from the coronavirus infection. FDA’s guidelines for vaccine development suggest a long road before a vaccine is widely available.    

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FX Update

Worldwide coronavirus cases surpasses 10.4M with over 507,000 deaths officially reported.

As most countries gear up for a second wave of coronavirus the burning question is how bad will this be? 

While most economic news recently out of the US has been positive such as Retail Sales and Home Sales is undoubtedly good news, is it sustainable? The dreaded second wave could have serious consequences on the state of mental health and economies around the world. The US govt stimulus programs only have a limited life span until the money runs out. Coronavirus is rising at an alarming rate with some states and hot spots remaining in lockdown. Payroll protection loans to small businesses and unemployment bonuses have nearly ended creating an awful time for employers as they consider whether to keep staff on or not. Where to from here? Victoria, Australia has just reported 75 new cases on Monday with the chief health officer suggesting it will get worse before it improves. Of these cases 6 are said to be community spread with most (57%) Australians expecting the virus to impact home activities, employment situations and social behavior for longer than 6 months.  Any trans- bubble earlier considered has long been abandoned in my book as we eye a long road to economic global recovery. 

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Economic Releases

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Monday 29/06

  • All Day, EUR, Italian Bank Holiday

Tuesday 30/06

  • 1pm, CNY, Manufacturing PMI
    • Forecast 50.4
    • Previous 50.6

Wednesday 01/07

  • 1230am, CAD, GDP m/m
    • Forecast -10.50
    • Previous -7.20
  • 430am, USD, Fed Chair Powell Testifies
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Covid 19 Back on the Menu

Worldwide coronavirus cases surpasses 9.18M with over 474,000 deaths officially reported.

Risk sentiment looks to be back dominating play both directions as market participants start to digest the possibilities of second wave coronavirus around the world and its implications on economies now and long term. One could argue that we are not yet out of wave one with global statistics still showing an alarming 20,000 plus cases popping up every day.  News out of Beijing China doesn’t look good after the virus was all but gone on the 9th of June with the last infected case being released from hospital, now they have over 200 cases with hundreds of flights cancelled, schools closed and residential facilities back in strict coordinated lockdown. As with the Wuhan outbreak the situation in Beijing seems to be fairly well managed, the same cannot be said for parts of the US with some states -Florida and Arizona along with California all have new cases rising exponentially. Countries like Brazil, India, Peru and Chile have all experienced a flood of new cases in the last few days, including our friends in Victoria (Australia). All this adds up to a pessimistic market tone falling in line with more distancing restrictions being ratcheted up around the globe. 

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Economic Releases

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Monday 22/06

  • 11am, AUD, RBA Gov Lowe Speaks

Tuesday 23/06

  • 3am, CAD, BOC Gov Macklem Speaks
  • 715pm, EUR, French Flash Services PMI
    • Forecast 44.9
    • Previous 31.1
  • 730pm, EUR, German Flash Manufacturing PMI
    • Forecast 41.5
    • Previous 36.6
  • 730pm, EUR, German Flash Services PMI
    • Forecast 41.7
    • Previous 32.6
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FX Update

Worldwide coronavirus cases surpasses 8.5M with over 455,000 deaths officially reported.

The New Zealand economy shrank by 1.6% in the January to March 2020 quarter, or roughly 310B New Zealand Dollars ending 9 years of growth. Expectations were the economy to shrink by 1.0% in the first quarter missing the mark. Predictions are for the economy to contract around 14.0% in the second quarter. This will mark a formal drop into recession when figures release on 18 September. Compared to first quarter 2019 the economy was down 0.2% y/y but actually grew by 1.5% in the year ending 31 March 2020. Figures show that this is the first contraction in growth since the third quarter of 2009 and the largest first quarter contraction in 29 years highlighting the horrific economic impact coronavirus has and will continue to have on the country’s growth.

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Second wave coronavirus concerns affect mood

Worldwide coronavirus cases surpasses 8M with over 435,000 deaths officially reported.

The Japanese Yen closed the week earning the top spot, beating out all other major currencies as “risk trade action” fades and sends investors and traders away from risk assets. We also saw better economic data out in Japan potentially supporting the Yen over the week. We saw a strong bounce in US Dollar performance with market reaction to shifts towards a dovish economic outlook by the Federal Reserve, reports of more clusters of coronavirus appearing around the US are also weighing in. Several months back we were talking about a possible V shaped economic global comeback/recovery meaning the economic impact would be deep but bounce back hard.

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Economic Releases

Tuesday 16/06

  • Tentative, JPY, Monetary Policy Statement
  • 6pm, GBP, Claimant Count Change
    • Previous 856.5k

Wednesday 17/06

  • 1230am, USD, Core Retail Sales
    • Forecast 5.50%
    • Previous -17.20%
  • 1230am, USD, Retail Sales m/m
    • Forecast 7.40%
    • Previous -16.40%
  • 2am, USD, Fed Chair Powell Testifies
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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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