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FX Update

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Day 6-  Level 2 NZ lockdown.

Worldwide coronavirus cases surpasses 5,000,000 

New Zealand’s growth rate (GDP) is forecast to decline from the 2.8% year ending June 2019 to -4.6% to the year ending June 2020. This is driven by a massive fall in the second quarter 2020 coronavirus fuelled downturn of somewhere around 20.0%. The RBNZ are forecasting growth to return into the positives in the 3rd quarter (September) 2021. So that’s 5 economic quarters we could see the New Zealand Economy weighed down by the virus implications before a proper recovery. Unemployment is expected to rise to over 8.0% in the June quarter 2020 peaking around 10.0% in the 3rd quarter 2021. This is in comparison to Australian economic growth (GDP) which is expected to decline by around -12.0% in the June 2020 quarter followed by -7.0% in the third quarter and -6% in the fourth quarter 2020. A rebound of 6.0% growth is forecast in the third quarter 2021. Australian Treasury Secretary Kennedy said when asked about an Australian recession- “we’ve gone well past” a recession. I’m not sure if he is looking at the same balance sheet with Australia expected to formally slip into recession later this year.

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Covid-19

Successful Covid-19 vaccine trials lifts mood

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Day 6-  Level 2 NZ lockdown.


Worldwide coronavirus cases nears 5,000,000


Markets Monday entered the week feeling optimistic about global economies with equity markets pushing higher and risk currencies reversing from recent lows. News of a potential coronavirus vaccine stoked a fresh bull mood as company Moderna reported positive “phase one” results for a potential Covid-19 vaccine. All 45 of the trial participants developed coronavirus antibodies.

US Fed chairman Powell spoke Monday suggesting US Unemployment will be somewhere in the range of 20-25% at its peak. If the economy is to recover fully from the fallout of Covid-19 we might need a vaccine. Powell said there are a lot more options he has at his disposal to tweak the current lending program to support the economy.  

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RBNZ

Market Update

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Day 2- Level 2 NZ lockdown.

The Reserve Bank of New Zealand Monetary Policy Committee agreed to leave the cash rate on hold at 0.25% Wednesday and agreed to expand the 33B (LSAP)- Large Scale Asset Purchase programme to 60B. The LSAP’s include NZ Govt Bonds, Local Government Funding Agency Bonds and NZ Government Inflation Indexed Bonds. The global fallout from disruption from coronavirus has led to lower economic growth and inflation with unemployment hugely affected. The RBNZ said even if New Zealand manages to contain the virus, or knocks it out completely, reduced world demand for products will mean a lower demand for NZ export products. Adrian Orr said negative Interest Rates could become an option in the future. The release took the NZDUSD off 0.6080 to just off 0.6000
The NZ Annual Budget known as the “Rebuilding Together” budget announced yesterday was one the of the weirdest on record.

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Direct FX

Risk Currencies Push Higher

Day 11-  Level 3 NZ lockdown

Risk currency pairs ruled the roost for most of last week with the Australian Dollar, New Zealand Dollar and the Canadian Dollar all doing well against the major currencies, the big mover being the Aussie outperforming the Pound 3.0%. The US jobs report confirmed a terrible April for Job losses with a further 20.5M Americans filing for unemployment. The Unemployment rate has surged to WW2 high of 14.7%. The English Pound has recovered most of the March losses amid coronavirus infections, pivoting around the 1.25 area against the US Dollar. We do however see limited movement north in 2020 for the Pound as economic conditions worsen with covid-19 in the UK and Boris struggles to piece together post Brexit trade negotiations.

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Economic Releases

Economic Releases

Monday 11/05

  • 1pm, NZD, ANZ Business Confidence
    • Previous -66.6

Wednesday 13/05

  • 1230am, USD, CPI m/m
    • Forecast -0.70%
    • Previous -0.40%
  • 2pm, NZD, Official Cash Rate 
    • Forecast 0.25%
    • Previous 0.25%
  • 2pm, NZD, RBNZ Monetary Policy Statement 
  • 2pm, NZD, RBNZ Rate Statement 
  • Tentative, NZD, RBNZ Press Conference
  • 6pm, GBP, Prelim GDP q/q
    • Forecast -2.50%
    • Previous 0.00%
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FX News

FX Update

Day 11-  Level 3 NZ lockdown. 

Comparisons between economic reviews and macro themes from the beginning of this year to today’s releases are vastly different. Times of improving conditions and economic recovery have fast eroded in the current global landscape we are now part of. Monetary policies of world leading central bank countries have backtracked from solid economic indicators such as improving employment and inflation expectations to what we see today. 

Coronavirus has indeed put up a massive roadblock up to any global momentum. Strategy of the RBNZ has been like all other central banks- bringing out all arsenal of extreme measures to combat the fallout of the virus with record fiscal stimulus and QE (quantitative easing) and much lower interest rates-  New Zealand currently has the lowest cash rate on record at 0.25%.

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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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