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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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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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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 – 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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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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Central Banks slash cash rates to boost economies amid Covid-19 fears.

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The Melt down in Financial Markets continued into Monday following last week’s massive sell off in just about every financial instrument since the 2008 Global Financial Crisis. 

The RBNZ cut rates at 8am Monday morning from 1.00% to 0.25% in an unscheduled announcement. Last week Orr said he would not need to make a one off policy meeting announcement but with the Covid-19 impacting just about everyone, the central bank decided to cut sooner rather than the scheduled 25th March outing. Prime Minister Ardern announced travel restrictions over the weekend that require all people travelling into the country to self-isolate for 14 days. The New Zealand tourism industry is expected to grind to a halt with NZ expected to dip into recession for as long as the virus remains uncontrolled. If a May QE program was necessary from May this would undoubtedly put downward pressure on the NZD. NZ second quarter GDP is expected to come in much lighter as the economic fallout takes a toll. An economic “business fiscal package” is to be announced today at 2pm by Jacinda Ardern and is said to be significant.  

Spain and France have announced emergency restrictions like Italy banning people from public gatherings. The epicentre is now Europe with this region being in the centre of the coronavirus epidemic.  Read more

COVID-19 Care

We are in full operation and following the correct measures during the Coronavirus outbreak. If required we will work from our homes and will continue to supply the same 24/7 service. If you have any questions please call or email one of the dealers.

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Economic Releases

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

Monday 16/03

  • 8am, NZD, Official Cash Rate
    • Previous 1.00%
    • Actual 0.25%
  • 8am, NZD, RBNZ Rate Statement
  • 10am, USD, FOMC Statement
  • 10am, USD, Federal Funds Rate
    • Previous <1.25%
    • Actual <0.25%
  • 1017am, USD, President Trump Speaks
  • 11am, NZD, RBNZ Press Conference
  • 1130am, USD, FOMC Press Conference
  • 3pm, CNY, Industrial Production y/y
    • Forecast -3.00%
    • Previous 6.90%
  • Tentative, JPY, BOJ Policy Rate
    • Previous -0.10%
  • Tentative, JPY, Monetary Policy Statement
  • All Day, All, G7 Meetings

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FX Update

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Is it financial armageddon?

Coronavirus is officially out of control with the World Health Organisation declaring it a Pandemic overnight Wednesday. Numbers continue to balloon out with 125,000 people affected now and 4,600 deaths worldwide.

Whatever they are doing in Italy is clearly not working with the govt ordering all shops to close except groceries and pharmacies.  Prime Minister Conte said if cases continue to rise this doesn’t mean tighter restrictions. Rome residents are still out and about socialising (coming from someone in Rome) which may explain things.  People have initially ignored the warning alarms and ignorantly gone about their normal daily lives. US President Trump has made face masks available to healthcare workers – wow, this is a sign the US has now started to treat the virus seriously. Trump also announced a travel ban from all incoming flights from Europe for 30 days beginning today. 

Adrian Orr said he has not, and still does not need to use alternative monetary policy instruments to alleviate any such potential strain to the New Zealand economy.  The concern at the moment is how much GDP will be affected over the coming months with the significant slowdown in global demand taking form. Words like uncertainty, fear, slowdown and risks are being bandied around not just locally but globally. Central banks over the coming months could end up close to, or at zero interest rates as recession woes weigh heavy. There is still a chance the RBNZ could announce an emergency meeting and ease monetary policy from the current 1.0%. Read more