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NZD holds small gains in thin US Holiday trading

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Australia

Westpac Australian Consumer Confidence rose 2.3% m/m which is an encouraging sign given recent bushfires and Coronavirus scares. Governor Lowe said the Coronavirus is having an uncertain impact on the economy but major impact on tourism sectors. The recent Chinese policy stimulus package will help the Australian economy especially with the Iron ore price recovering off recent lows. This week’s monetary policy minutes from the RBA’s 4th Feb statement is in focus along with Wage data Wednesday and Unemployment figures Thursday.    

New Zealand

The RBNZ left the cash rate unchanged at 1.0% as widely predicted but changed their policy stance from an easing bias to a neutral tone sending the kiwi into a flurry. Employment remains above sustainable levels and economic growth is expected to accelerate over the second half of 2020. No further rate cuts are forecast for 2020 with inflation at close to the 2.0% midpoint target. Coronavirus (COVID-19) ongoing risks could pose downside volatility to the New Zealand Dollar if more new cases are reported. This week’s calendar cupboard is bare with no significant local economic data releasing.  Read more

FX Update

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Investors seem to have forgotten about Coronavirus over the past few days with risk currencies all posting gains along with equity markets trading to fresh highs. The general feel has been that the virus has shown signs of peaking and has been contained. Not so fast – yesterday’s news of an additional 14,840 new cases sent markets back into a “risk off” tone.

RBNZ left the cash rate unchanged at 1.0% as widely predicted but changed their policy stance from an easing bias to a neutral tone sending the kiwi into a flurry. Employment remains above sustainable levels and economic growth is expected to accelerate over the second half of 2020. No further rate cuts are forecast for 2020 with inflation at close to the 2.0% midpoint target. Coronavirus (COVID-19) ongoing risks could pose downside volatility to the New Zealand Dollar if more new cases are reported. The NZD rallied across the board bouncing half a cent higher against the US Dollar and Australian Dollar post RBNZ release.   

Westpac Australian Consumer Confidence rose 2.3% m/m which is an encouraging given recent bushfires and Coronavirus scares.  The Australian Dollar piggybacked the kiwi higher Wednesday post RBNZ statement. Governor Lowe said the Coronavirus is having an uncertain impact on the economy but major impact on tourism sectors. The recent Chinese policy stimulus package will help the Australian economy especially with the Iron ore price recovering off recent lows. 

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RBNZ

RBNZ Cash Rate Announcement

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This afternoon the RBNZ left the cash rate unchanged at 1.0% as predicted but changed their policy stance from an easing bias to a neutral tone. Employment remains above sustainable levels and economic growth is expected to accelerate over the second half of 2020. No further rate cuts are forecast for 2020. The NZD rallied across the board and bounced half a cent higher against the US Dollar and Australian Dollar.

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FX Update

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Australia

The Australian Dollar has underperformed over the last week, dropping against all major currencies and over 2.0% against the Pound. The RBA left their cash rate unchanged last week at 0.75% saying they would ease policy further if it was needed to sustain growth and rates would stay low for a considerable time. The RBA expects the economy to grow by 2.75% – 3.0% in 2020 and 2021 with signs of a turning housing market in Sydney and Melbourne starting to impact. The Bushfires and coronavirus will continue to weigh on the growth forecasts but employment is expected to remain at peak levels for some time. The slowdown in the Chinese economy from the ongoing impact of coronavirus will continue to impact Australian growth. RBA’s Lowe speaks Thursday, the only point of interest this week.

New Zealand

The New Zealand Dollar continues to head mainly south versus its peers as risks to the New Zealand Economy are slanted to the downside. The Reserve Bank of New Zealand meet Wednesday and should hold rates steady at 1.0% but the decision may be closer than we think. Back at the November policy meeting the RBNZ said they were in a data dependant mode with most data coming in positive since then such as business confidence and inflation as well as a drop to the unemployment rate from 4.2% to 4.0%. With that being said the ongoing implications and fallout from the coronavirus outbreak will certainly impact GDP figures and a possible cut in the April meeting. Read more

FX Update

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Australia

Australian fourth quarter inflation rose a touch to 0.7% from 0.6% expectations with improved dwelling prices having the biggest impact. Tobacco, Alcohol and transport fuel costs also had modest rises but food prices such as fruit and vegetables impacting from fire stricken areas were benign – for now. These products should filter through into inflation numbers over first quarter 2020. The annualised inflation rate moved higher from 1.7% to 1.8% which will please the Reserve Bank of Australia with some banks now predicting the RBA won’t cut rates today until April. Retail Sales and Trade Balance print late in the week.   

New Zealand

New Zealand plunged 1.5c against the US Dollar last week largely based on Coronavirus fears.  NZ are now blocking travellers who have recently travelled through mainland China in efforts to try to keep the virus out of New Zealand. The ban starts today with the government placing restricted entry into New Zealand on all foreign nationals who have travelled from China or through China. The virus has now killed over 400 people with the affected now more than 20,000. The first death outside China has been reported in the Philippines. This week on the economic calendar we have employment numbers with the unemployment rate expected to stay at 4.2% and quarterly Inflation expectations.  Read more

Economic Releases

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

Monday 03/02

  • 245pm, CNY, Caixin Manufacturing PMI
    • Forecast 51
    • Previous 51.5

Tuesday 04/02

  • 430pm, AUD, Cash Rate
    • Forecast 0.75%
    • Previous 0.75%
  • 430pm, AUD, RBA Rate Statement

Read more

FX Update

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Coronavirus has now claimed the lives of 213 people – as yet none of these have been outside China. The daily confirmed cases keep climbing and are now 9,692 as of 31 Jan, but the true figure may not be known for another week or two as China withhold the true numbers. The virus has impacted markets over the week with investors largely risk averse.  

Financial Market focus has been in the US with US company earnings results with Thursday’s snapshot of Microsoft, Facebook, Tesla and Paypal share prices all jumping higher on better than predicted revenue predictions.

The Federal Reserve voted 10-0 in favour of a remain yesterday morning for 1.75%. Comments from Powell suggested the economy has been rising at a moderate rate. Recent unemployment remains low and household spending has been rising at a decent pace. The current stance which is exactly the same as the December stance/statement from the Fed on monetary policy is appropriate and supports sustained economic activity. Powell ruled out late last year’s rate cuts forecast saying such a step would require a sustained rise above the forecasted 2% inflation target. Read more

FX Update

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Australia

The Australian Dollar is the weakest main board currency over the past 10 days as it has been sold off in risk off flows associated with the coronavirus. Although last week’s employment data highlighted an improvement for December 2019 it offered no relief for the Aussie Dollar as setbacks supporting poor market sentiment have been overwhelming. Add in bushfire costs and we still see a decent chance of a rate cut at the 4th Feb RBA meeting. Looking ahead we have quarterly CPI Wednesday forecast to be 0.6%      

New Zealand

Fourth quarter CPI figures showed a rise to 0.5%, up on the 0.4% expected sighting, increased costs in rental prices and airfares were sighted. This reinforces the RBNZ may not cut rates at the next meeting on 12 Feb given inflation targets fall within the targeted 1-3% over the next 12 months. 82 coronavirus deaths have been reported now with a further 2,700 cases confirmed in mainland China. 50 cases in 13 countries outside China have also been reported with 5 very close to home in Australia concern. This week we have no tier one data on the calendar to consider. Risk flows will dominate movement based on headline news with coronavirus. Read more

FX Update

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Headlines surrounding the Coronavirus sent markets into a risk off tone Wednesday sending the NZD and Aussie currencies lower. Markets fears eased into Thursday when Chinese officials talked down concerns but further attempts to calm investor confidence failed into Friday with more deaths and reported cases. Equity markets and associated risk products made early gains but fell into risk off Friday.

The English Pound recovered early week losses when employment data published well. The Unemployment Rate remained stable at 3.8% along with the employment rate which is estimated at 76.3%. Average Earnings also printed up at 3.2% from 3.1% showing businesses are paying slightly more for labour. This may dampen expectations of an interest rate cut at next week’s BoE meeting with the probability of a rate cut still around 60%. Boris Johnson’s Brexit deal is one step away from becoming law after the Withdrawal Agreement Bill was passed Thursday morning. The Bill now only needs royal approval for the UK to leave the EU on the 31st of January.      Read more

Central Bank’s hold Focus with BoJ, BoC and BoE

Australia

Chinese fourth quarter GDP came in on estimate at 6.0% and Industrial Production was significantly higher than the 5.9% expected at 6.9% assisting the Aussie Dollar late in the week into this morning’s trading. With Chinese imports of Iron Ore at close to record highs in December as well as local production up 12.0% at the same time in 2019 we could see a well buoyant AUD over the coming days/weeks. Also supported by the recent signing of the phase on trade deal between the US and China and talk of phase two underway we should see the AUD well supported for a while if risk sentiment allows. Data this week is limited to the Aussie Unemployment Rate and employment change.

New Zealand

Then New Zealand Consumer Price Index has been rising steadily over the past few years but not quite as fast as recent quarters. The index for the second quarter of 2019 was 1032 (plus 0.6%), rising to 1039 (plus 0.7%) for the third quarter a record quarterly high. The average quarterly rise from 1925 is 318.31 with the average over the past decade at 1018.29 according to statistics. The figures are based on a basket of products and services. Rental increases in various centres across New Zealand particularly over the past year have a big part to play. Fourth quarter CPI is due this Friday the only notable local data which is expected to come in with a 0.4% (1015) rise. Read more