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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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FX News

FX Update

Worldwide coronavirus cases surpass 30.3 million with over 950,000 official deaths.

New Zealand second quarter GDP turned out to be a big “wet fish”, coming in at -12.2% based on rough estimates of -12.0% predicted. The announcement had very little effect on the NZD broadly with most crosses fairly unchanged post announcement. The data however marks the biggest quarterly fall in New Zealand history with the deepest contraction on record. It puts the country formerly in a recession after first quarter GDP released down 1.6% earlier in the year. Most other economies have already announced their second quarter numbers with France almost -14%, UK posting a y/y drop of 21.7% and the US at -9.5% and Australia at -7.0%. The difference of rebounds in third quarter growth results should be dictated by coronavirus lockdowns and how governments have responded. In theory the NZ economy should bounce back hard towards year end and early 2021 as second wave lockdowns have not been as extreme as Australia for example.

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Howard Wilcox

Central Bank Excitement Looms

Worldwide coronavirus cases surpass 29.4 million with over 932,000 official deaths.

Wholesale swap rates -particularly the 2 and 3 year yield dropped below zero last week along with the 2023 NZ Government Bond rate which went to -0.025%. Since then these rates have traded back into positive territory but this if anything marks a moment in time of things to come. The NZ cash rate has been forecast to go below 0 for a while with analysis predicting the rate could be at -0.5% come April 2021 monetary policy release. Recent words from Adrian Orr confirming a combination of negative rates and fixed term lending will likely be started if/when further stimulus is required.     

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Economic Releases

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Thursday 03/09

  • 1230am, USD, Core Retail Sales m/m
    • Forecast 1.00%
    • Previous 1.90%
  • 6am, USD, FOMC Economic Projections
  • 6am, USD, FOMC Statement
  • 630am, USD, FOMC Press Conference 
  • 1045am, NZD GDP q/q 
    • Forecast -12.50%
    • Previous -1.60%
  • 130pm, AUD, Unemployment Rate
    • Forecast 7.70%
    • Previous 7.50%
  • Tentative, JPY, Monetary Policy Statement
  • 11pm, GBP, MPC Official Bank Rate Votes 
    • Forecast 0-0-9
    • Previous 0-0-9
  • 11pm, GBP, Monetary Policy Summary

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Howard Wilcox and Neven Fisher

FX Update

Worldwide coronavirus cases surpass 28.3 million with over 913,000 official deaths.

The Japanese economy weakened by 7.9% in the second quarter of 2020 after a 8.1% expected drop. This comes after a 0.6% drop in the first quarter and a 1.8% fall in the fourth quarter of 2019. The terrible decline in the second quarter was the largest quarterly fall in Japanese history as coronavirus deepens the economy. Also out this week was second quarter Eurozone GDP with the Euro area shrinking 11.8% in the 3 months to the end of June. This was slightly lower than initial predictions of 12.1% falls but is the largest growth evaporation on record sending the economy formally into recession after a first quarter decline of 3.6%          

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FX Update

Worldwide coronavirus cases surpass 27.4 million with over 895,000 official deaths.

Right on cue at the start of September the stock market rally winning streak has come to an end. We mentioned last week how the reality of investing in any stock market has its dangers based on a historical fact that September months since 1950 have produced the worst results. Both the S&P and NASDAQ on a weekly level ended their five week bullish streak with the S&P falling 2.4% and the NASDAQ dropping 3.2%. The DOW also didn’t escape the carnage, losing around 1.8% on the week. The US Dollar on the other hand posted gains of 7.5% as traders and investors climbed into “safe haven” investments buying up the greenback.   

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