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FX News

Economic Releases

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

Tuesday 26/11

  • 1005pm, AUD, RBA Gov Lowe Speaks

Wednesday 27/11

  • 4am, USD, CB Consumer Confidence
    • Forecast 126.9
    • Previous 125.9
  • 11am, NZD, RBNZ Gov Orr Speaks
  • 130pm, AUD, Construction Work Done q/q
    • Forecast -1.00%
    • Previous -3.80%

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FX Overview

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This week’s movement in currencies has been choppy to say the least with no real clear direction.

Wednesday’s Global Dairy Auctions delivered good news to local farmers with good prices achieved across the board in dairy products but most importantly in Whole Milk and Skim Milk. The auction was the 5th in a row of positive prices. Fonterra has revised their 2019/2020 milk solid pay-out to between $6.55-$7.55 per kg, up 30 cents from the previous forecast of $6.25- $7.25. The world demand for whole milk powder is expected to be good for the remained of the season through to May 2020 with global WMP supplies lower than normal. 

After nearly two years of negotiations in the China/US tariff saga with many false draws along the way we seem to be no closer to actually seeing a deal agreed by both parties. Apparently progress towards “phase one” is being made but we have heard this all before. Although we have been fed news that a deal is close to being done in reality the situation resembles a scenario which could go either way as it balances over the edge of a cliff. Both sides remain divided over key trade issues yet the rumour is they are close. Who knows. Read more

Central Bank speak the focus- NZD/AUD holds 0.9380

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Australia

The Australian calendar looks scant this week with just the RBA releasing monetary policy minutes from the November meeting. This should not bring any surprises from recent policy and have little impact on the Aussie. Australian unemployment rose from 5.2% to 5.3% last week broadly assisting to underperform the currency. Full Time employees and part time employees both declined in the month of October. With the total number of people added to the labour force around 310,000 with an average per month increase of 25,000 this continues to be well above the employment trend of the past few years and no real cause of concern for the RBA.

New Zealand

Adrian Orr last week left the official cash rate at 1.0% and said it wasn’t his intention to surprise markets. Most expected a cut of 25 basis points with investors backtracking open short NZD positions post release when the NZD surged higher.  This made the New Zealand dollar the week’s strongest performer against its G10 peers as most other central banks are holding easing policies.  Further easing by the RBNZ could still happen if the economy warrants it.  Interest rates will need to stay at low levels for a long period until inflation reaches the midpoint of the target level of 1-3%.  The New Zealand House Price Index lifted 3.9% year on year to October nationally with the Median House Price now 607,500 up from 595,000 a jump of 2.1% m/m. This is also a 8.2% increase y/y from October 2018 figures of 561,500. Read more

FX Overview

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For the second time since becoming governor of the RBNZ Adrian Orr surprised markets. He kept the NZ overnight cash rate at 1.0% after cutting 50 points in August to 1.0% when markets had forecasted 1.25%.  Prior to the announcement stats showed support for a cut around 50-70%. Further stimulus to the NZ economy will happen only if economic developments warrant it, the RBNZ expects growth to drop to 2.0% in the December quarter 2019. Interest rates will need to stay at low levels for a long period until inflation reaches the midpoint of the target level of 1-3%. The NZD was broadly higher, up 70 points post release or nearly a cent against the US Dollar where it’s been drifting around over the last two days. The New Zealand House Price Index lifted 3.9% year on year to October nationally with the Median House Price now 607,500 up from 595,000 a jump of 2.1% m/m. This is also a 8.2% increase y/y from October 2018 figures of 561,500. With the Auckland market prices dropping slightly over the past 2.5 years agents are starting to see signs that asking prices are creeping up, with the region perhaps finding its mojo again.

More twists in the US-China trade talks/negotiations deteriorated risk sentiment as the two sides battle to agree on future solution. Trump said “we’ll see what happens, but it’s moving along rapidly”. He also said that if they were not able to reach a deal he is prepared to raise tariffs to Chinese imports. One of the biggest concerns is the dispute over farm products such as soybean and pork of which China has agreed to buy up an additional 50B worth annually. The problem is China is avoiding striking a “formal” deal as a way out if any further tariffs are introduced. Earlier markets had been hopeful that Trump would roll back tariffs on existing levies and not impose new tariffs of 15% set for December 15th – US importers bear the brunt of these tariffs and pass most of it onto US consumers. We suggest a stalemate for some time yet.

Australian unemployment rose slightly to 5.3% yesterday from 5.2% pushing the Australian dollar broadly lower. Figures showed declines in the number of people employed in October with full time employees down 10,300 and part time down 8,700. To put this into perspective the total over the past 12 months was around 310,000 based on an average monthly increase of 25,800 which continues to trend well above employment growth figures over the past 20 years. With the RBA targeting 4.5% unemployment they certainly have a way to go, with this data sure to raise questions on easing policy at the next RBA meeting on 3rd December.

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RBNZ

RBNZ Update

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The RBNZ left the official Cash Rate on hold at 1.00% today. Adrian Orr said the easing of cash rates over the past year will take time to filter into the economy. Further stimulus to the NZ economy will happen only if economic developments warrant it, the RBNZ expects growth to drop to 2.0% in the December quarter 2019. Interest rates will need to stay at low levels for a long period until inflation reaches the mid point of the target level of 1-3% The NZD is broadly higher, up 70 points or nearly a cent against the US Dollar.

RBNZ Remains Key Focus

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Australia

The Reserve Bank of Australia kept the cash rate on hold at 0.75% as widely predicted by markets. The Central bank was relatively upbeat over the pending outlook pushing the AUD higher post release with Lowe suggesting the easing bias had come to an end. Benefits to the Australian economy were seen in the Trade Balance figures with a higher surplus than expected. The 7.18B figure for September printed higher than the 5.1B expected with the average monthly surplus for 2019 registering a healthy 6B. This is a large improvement from the 1.8B surplus in 2018. The RBA will ease rates further if they view it’s needed, with the next cut more likely than not still expected early 2020. This week’s focus will be on third quarter jobs data Thursday. Anything less than ideal could spell a fresh downside theme develop.

New Zealand

The New Zealand Dollar ran out of energy to the topside midweek after NZ employment data and US/China trade news spooked the risk associated currency lower. NZ unemployment came off an 11 year low of 3.9% to tick higher to 4.2% taking all the sting out of a buoyant kiwi. Rumours by the Chinese that the US had agreed to unwind all trade tariffs were confirmed incorrect by Peter Navarro director of Trade and Manufacturing which led to a fresh wave of negative sentiment towards risk currencies and the kiwi diving lower across the board. The kiwi has been the worst performer against the US Dollar over the week. Attention now turns to the Reserve Bank of New Zealand delivering their Cash rate announcement and monetary policy this Wednesday. Most analysts are expecting the RBNZ to cut 25 basis points from the record low of 1.0% with the central bank confirming recently they would adjust if required. With economic outlook skewed to the downside we would be surprised if we didn’t see a cut eventuate. With slowing GDP annualised at 2.1% in September slipping lower and business confidence looking bleak as well as jobs data a cut looks well priced into the curve, but the NZD may look to target fresh lows. Read more

Economic Releases

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Monday 11/11

  • All Day, EUR, French Bank Holiday
  • 1030pm, GBP, Prelim GDP q/q
    • Forecast 0.40%
    • Previous -0.20%

Tuesday 12/11

  • All Day, CAD, Bank Holiday
  • All Day, USD, Bank Holiday
  • 3pm, NZD, Inflation Expectations q/q
    • Previous 1.86%
  • 12th-14th, CNY, New Loans
    • Forecast 800B
    • Previous 1690B

Wednesday 13/11

  • 130pm, AUD, Wage Price Index q/q
    • Forecast 0.50%
    • Previous 0.60%
  • 2pm, NZD, Official Cash Rate
    • Forecast 0.75%
    • Previous 1.00%
  • 2pm, NZD, RBNZ Monetary Policy Statement
  • 1030pm, GBP, CPI y/y
    • Forecast 1.60%
    • Previous 1.70%

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Economic Update

Central Banks Hold Focus

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Australia

Chinese data in the form of Caixin Manufacturing PMI surprised to the upside along with strong US Non-Farm payroll figures gave the Aussie a bullish bias Monday across a raft of currencies as markets looks towards today’s pivotal RBA cash rate and policy announcement. With Australia’s third quarter CPI improving this may have done enough to push back expectations of the RBA cutting from the 0.75% until December. Certainly, with a US-China “phase one” trade deal looming this has supported the Aussie of late.

New Zealand

Markets dialled back expectations of a 25 point cut for the November 13 RBNZ meeting overnight as the assistant governor Hawkesby said he has anticipated a total of 60 points would be cut over the next 12 months- this was achieved in the August meeting when the RBNZ cut 50 basis points to 1.0%. The RBNZ will continue to watch incoming data but given third quarter CPI (16th October) surprised to the upside and the Business Confidence index showed improvement at -42.4 we see a good argument for the RBNZ to keep rates on hold. Wednesday’s employment figures are expected to represent a 0.2% rise to the workforce with the unemployment rate edging higher to 4.2% from 3.9% which will undoubtedly put pressure on the kiwi. Read more

Economic Releases

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

Monday 04/11

  • 130pm, AUD, Retail Sales m/m
    • Forecast 0.40%
    • Previous 0.40%

Tuesday 05/11

  • 730am, EUR, ECB President Lagarde Speaks
  • 430pm, AUD, RBA Statement

Wednesday 06/11

  • 230am, CAD, Trade Balance
    • Previous -1.0B
  • 4am, USD, ISM Non-Manufacturing PMI
    • Forecast 53.5
    • Previous 52.6
  • 1045am, NZD, Employment Change q/q
    • Forecast 0.20%
    • Previous 0.80%

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