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FX Update

Direct FX

Worldwide coronavirus cases surpasses 13.935M with over 591,000 deaths officially reported.

Risk sentiment was positive during midweek trading sessions off the back of prospects of a vaccine contributing to the good mood. Moderna reported that their vaccine produces neutralising antibodies in chosen patients who received two doses, these were similar to results seen in coronavirus patients who had recovered. The results are from an initial 45 sample humans with new trials to begin late this month on 30,000 healthy people. They will compare vaccine results to placebo in patients between the ages of 18-55. If results are significant the vaccine would then be mass produced. Contributing to the positive mood was Merkel who commented that Germany is prepared to compromise to reach a deal for the European Recovery Fund. EU members are scheduled to meet in person on Friday and Saturday to work out a compromise on the multimillion dollar stimulus package.

Australian Unemployment for June increased by 210,000 compared to 100,000 expected with Unemployment coming in at 7.4% vs expected 7.3%. This brings the total number of unemployed in Australia to just under 1 Million people which is the highest number ever recorded since numbers began in 1998. This data alone should take the fizz out of the Australian Dollar at least in the medium term. The state of Victoria reported 317 new cases of coronavirus yesterday as 2 people were added to the death toll. 109 people remain in the hospital with 29 souls in the ICU. An older hospital is to be re-opened with an additional 84 beds to accommodate the extra cases, meanwhile in New South Wales they reported 10 new cases Thursday. As Victoria goes back to imposing lockdown this will weigh on jobs data and GDP for the third quarter. With the Aussie at just below 0.7000 against the US Dollar we think this is starting to look extremely overvalued. But hold all tickets – with the iron ore price trading up at almost a 1 year high of 105.00 per ton the resource is propping up the hopes of the Australian economy by cushioning the blow of coronavirus. If we see further demand in ore by Chinese industry we could see the Aussie go higher. Chinese second quarter GDP has come in at 11.50% growth compared to 9.6% forecast surprising markets, in fact it’s almost too good to be true. This follows a 9.8% contraction in the first quarter 2020 making the second quarter the faster quarter rise on record. Furthermore, the economy grew by 3.2% from the same time last year as authorities reaped the benefits of an aggressive campaign to control coronavirus. These are the sort of numbers we would expect from an economic environment with no Covid-19.

Key Points…
Chinese Industrial Production printed bang on expectations at 4.8% y/y with Retail Sales coming in at -1.8% y/y compared to 0.5% expected.
President Trump is considering issuing a travel ban to the US on the Chinese Communist Party and their families
NZ CPI was slightly stronger yesterday at 1.5% y/y but failed to move the kiwi
Coronavirus in the state of Florida is formally out of control with cases surpassing 316,000 today, they took more than 3 months to reach 100,000 and only two weeks to reach 200,000
The World Health organisation is still reporting daily coronavirus numbers consistently over 200,000 as the virus worsens around the globe
Victoria has recorded 400 new coronavirus cases today a record high, the state now has 4750 cases

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