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FX Update

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Day 8-  Level 3 NZ lockdown. 

Zero new cases of coronavirus were reported yesterday in New Zealand, the first time since the first reported case in the country on 28th February. Standard and Poor’s rating agency have rated NZ credit rating a AA suggesting a positive outlook based mainly off a strong fiscal position.

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Market Commentary 04/05

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April was a month of record gains on equity markets, but risk off sentiment prevailed, to close out the week. President Trump looks to be taking the Chinese Communist Party to task over the spread of the coronavirus globally. Trump has said he suspects the virus came from a laboratory in Wuhan, China. Trump also asked the question ‘why the communist party closed travel between Wuhan and the rest of China and not the world’? Larry Kudlow, key Trump financial advisor, said the Chinese will be held accountable. This rhetorical language boosted speculation of a trade war between China and the USA, which lead markets lower to close the week out.

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Market Commentary 30/04

The Gilead drug ‘remdesivir’ passed Government clinical trials and gave a great boost to markets overnight. Dr Fauci, prominent among Government epidemiologists leading the fight against the Chinese ‘Wuhan virus’, was very optimistic after the result of the clinical trials were revealed. This allowed already confident markets to rally strongly. The risk appetite was reflected in commodity prices and boosted the associated currencies. The NZD spiked up to 0.6130, while the AUD pushed up to 0.6545, as the economies unfreeze.

The Australian CPI data was in line with expectation, coming in at 2.2%, reflecting price rises rather than growth. NZ Trade data showed that both imports and exports were in line with expectations and were no cause for major concern. The ‘opening of the economies’ have assisted these trade exposed commodity currencies, but any negatives could be damaging, as they both remain extremely vulnerable.

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International Trade

FX Update

Day 2-  Level 3 NZ lockdown. 

A wave of optimism filled the air Monday with investors feeling comfortable around risk investments as countries around the world start to relax Covid-19 restrictions. The New Zealand Dollar has held its ground over the 0.60 mark, but the success story of late has been the Australian Dollar. The AUD has been the strongest performer not just over the past week but it has outperformed all its peers since April 6th and continues to be well supported. Coronavirus results have not only been extremely good (bit of luck perhaps) but Chinese data has also been favorable, boosting prospects of economic trade between the two countries. With supply chain disruption subsiding and a number of large companies back online things are starting to improve. Both NZ and Australia remain susceptible to mood changes and massive downturn in economic activity with huge monetary and fiscal stimulus still required to prop things up. But for now both the NZD and AUD are being driven higher.         

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Economic Releases

Tuesday 28/04

  • 930am, USD, President Trump Speaks

Wednesday 29/04

  • 2am, USD, CB Consumer Confidence
    • Forecast 88.2
    • Previous 120
  • All Day, JPY, Bank Holiday
  • 130pm, AUD, CPI q/q
    • Forecast 0.20%
    • Previous 0.70%
  • 130pm, AUD, Trimmed Mean CPI q/q
    • Forecast 0.30%
    • Previous 0.40%
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Market Overview

Day 26 of the official NZ lockdown. 

As we end another week of lockdown it’s hard not to notice how subdued currencies have been. Sure we have had windows of volatility, even small flash moves no-one can explain but overall the main crosses have flatlined with not a whole lot economic activity. Even the USD/JPY has been stuck in the 107’s for the second week running. The price of Crude Oil has been the main talking point with price dropping way below zero, with one oil analyst saying- it’s now worth as much as a bucket of faeces. It stabalised into Friday with price back around a measly but welcomed 17.00 per barrel. This boosted stock prices as well and risk currencies with the kiwi operating around 0.6000 against the big dollar, but, most main currency pairs are trading without any real direction. The Aussie rose across the board as Retail Sales published a surprisingly decent figure (up 8.0%) but was quick to trim its gains. World central banks continue to offer unprecedented easing policies by dishing out massive amounts of cash to stimulate economies from worst case covid-19 related depression scenarios, the bank of Japan will meet again early next week to discuss further easing. On the whole we see another bout of risk-off market sentiment on the horizon amid the ongoing Covid-19 uncertainty heading into the weekend and into next week and expect currency risk related products to decline.        

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Market Commentary 22/04

The collapse in Oil prices continued to dominate markets, as the impact flowed through into the banking sector and the wider equity markets. US equities have sustained massive losses in equities, in the first two trading days of the week, as markets consider the impact on the banks of the collapse in the Oil and Gas sector. President Trump tweeted his support for industry and instructed his Energy and Treasury secretararies to ‘formulate a plan’ to support the ‘great US energy companies’. The collapse in global demand has conspired with over production to provoke this situation and while there has been a deal with OPEC PLUS to limit supply, the only solution is to re-open global economies.

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NZD Holds Gains

Day 26 of the official NZ lockdown. 

NZ will ease level 4 Covid-19 restrictions the govt announced Monday. From 27th April NZ will reopen on Level 3 with many businesses able to re-open again although in a contactless manner. The big change will be with restaurants, and food operators who will be able to sell food via delivery service only. Around a third of these businesses nationwide will reopen. Workspaces will also be able to reopen but the government is asking that people who can work from home continue to do so. Non-essential travel and movement will remain the same with most people required to stay at home unless its approved style activity. 

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