FX News

NZD the worst performing currency in April

International Trade

Australia

All in all it was a solid week for the Australian Dollar closing just above its opening price around the 0.7100 area against the greenback.  The Reserve Bank of Australia left rates unchanged at 1.50% Tuesday but gave a cautious statement to the outlook to the Australian economy for the next while. Governor Lowe gave the impression he was preparing us for lower rates after growth nearly stalled over the second half of last year. The Aussie Dollar initially dropped to 0.7050 levels against the big dollar but by midday Wednesday was pushing 0.7100. The Australian budget lowered its GDP forecast for the current financial year to 2.25% down from 2.75%. Through to 2020/21 growth is expected to rebound to 2.75%. Retail Sales published much higher than the predicted number of 0.3% to 0.8% offering relief for the dovish RBA. May the 18th is looking the most likely date when federal elections will be held. The latest poll is suggesting current government is 47% support while the opposition is 53%. This week’s calendar is not as action packed as last week with Westpac Consumer Sentiment holding market interest.

New Zealand

Who turned up to work an hour early?
Leading into the market close the NZ Dollar was the weakest performer in the major group dropping to 0.6717 against the US Dollar post (NFP) Non-Farm Payroll release. It has struggled to gain any traction after increased chances that the RBNZ could cut their interest rate in the next (May) meeting weighing the kiwi down. This week’s bias will be to the downside with a lack of local economic data price will be vulnerable to offshore shifts in sentiment. US Non-Farm Payroll for March printed up on expectations of 172,000 at 196,000 showing an improvement from the poor February numbers, while average earnings growth came in lower at 3.20% y/y from 3.40%. Unemployment remains the same at 3.80% with notable gains in healthcare and professional services.

United States

It was a sea of red on last week’s US economic calendar ending in a positive (NFP) Non-Farm Payroll release. To summarise we had poor Retail Sales, poor Durable Goods orders, weak ADP Payroll, weak ISM Manufacturing and poor Average Earnings falling to 3.2% y/y from 3.4%. Non-Farm Payroll surprised to the upside with 196,000 new people being added to the US workforce based on the 172,000 number expected. This number is extra significant after printing down in February and rebounding in March. The US Dollar closed the week out with the tag of best performer after a rally in the greenback. The news also sparked interest in equity markets the Nasdaq higher by 0.7%. The US Dollar Index closed just off its monthly high. The US and China have been chatting again around putting together a trade deal but media suggests they are no closer to closing in on a “real” deal of substance.  Larry Kudlow said “we have made great progress on the IP theft. We made progress on the forced transfer of technology”. The Chinese news agencies seem to be publishing more of a realistic view of the real situation which is to say “significant work” is to be done. US CPI m/m is released Thursday along with Producer Price index Friday.

Europe

The Euro has literally been all over the place on the charts last week closing around the 1.1220 area after opening at a similar level. At least it has halted two weeks of declines against the Aussie and the US Dollar. Recently the ECB changed its position on interest rates, saying they expect to maintain at current levels until the end of 2019 with new TLTRO’s (Target longer Term Refinancing Operations) to be announced and confirmed.  Such details as rates and dates and the structure will be revealed as to try to entice banks to add them to their lending books. The problem is the maturity dates should be tied into the slowdown in growth which is unknown. The ECB will keep rates on hold during Thursday’s Monetary policy meeting but as above expect the central bank to announce a fresh wave of liquidity raising measures.

United Kingdom

The British Pound is still extremely volatile given the recent Brexit stalemate after the string of parliamentary voting never produced a thing. Trading around the 1.3050 area against the US Dollar the Pound continues to bounce around on headline news. Theresa May continues to push her deal as April 12 nears as markets brace for more negotiations to continue this week. May’s extension request to the current deadline has received mixed results with her talks with the opposition halted. May has written to Tusk, the EU president, to ask for an extension to the 30th of June as the new exit date with an option of leaving earlier if such a deal can be agreed. Tusk has offered flexibility to May suggesting a possible extension of up to one year. Unless a new date is agreed during this week’s emergency EU summit, the UK will crash out of the EU with no deal on April 12. UK data this week is confined to Wednesday with monthly GDP and Manufacturing production.
Here are the stats from Goldman Sachs:-
-No deal Brexit 10%
-Modified Brexit deal 50%
-No Brexit 40%- (that’s no exit at all)

Japan

Japan’s household wages fell last week surprising markets and adding concerns to the already weak economy which has been losing momentum of late. Spending figures increased slightly but less than the 1.8% to 1.7% analysts were predicting. Wage growth has risen consistently in recent years with a tight labor market, but they have not risen enough to a level which has impacted or boosted inflation. Friday’s Leading Indicators Index which measures the stability of the economy published at 97.4% from the 97.3% expected, showing a decent weighting over the 11 different economic weightings that the economy is on track. Monday’s Consumer Confidence showed a different picture printing at 40.5 from the 41.5 predicted and dropping the Yen across the board. Producer figures publish Wednesday and should print well based on previous numbers from mid March.

Canada

The Canadian Dollar gave back its gains late during the weeks European and NY trading sessions. Largely due to weak employment numbers – Canadian unemployment printed unchanged at 5.8% but it was the change in the total number of people who were added to the workforce which came in well short of the 3,000 expected, shedding  -7,200 for March. This is the first decline in seven months which just about confirms that the bank of Canada will almost certainly leave rates unchanged at the April 25th BoC meeting. There is nothing going on this week on the Canadian docket except the six monthly OPEC meeting held in Vienna. Crude Oil has held up above 62.00 support and now trades at 63.34 – 0.5% higher on the Friday close and slightly down on the 63.49 high.

Major Announcements last week:

  • NZ Business Confidence prints poor
  • Aussie Building Approvals up an astounding 19.1% on predictions of -1.7% for February
  • RBA keep Cash rate unchanged at 1.50%
  • Australian Retail Sales releases at 0.8% based on predictions of 0.3%
  • Australian Trade Balance prints at 4.80B from the forecasted 3.71B
  • US Non Farm Payroll releases at 196,000 based on expectation of 172,000
  • US Unemployment remains the same at 3.8%
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