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Market Commentary 09/04

Markets continued to rise as certainty returns. The course of the coronavirus looks to be more predictable and all the models forecasting infection and death rates, have been overestimated. The increase in infection rates are falling in Europe and the US, suggesting that viral spread has peaked, giving markets some confidence. Control and containment seem to have been achieved and authorities are now working the return to work scenarios. There are many risks out there, but markets have an improving risk appetite, allowing the USD to settle. The Yen traded 108.85, while the GBP charged back above 1.2400, boosted by the improving medical situation of PM Johnson.

The EUR struggled to gain upward momentum, despite the flagging reserve, probably due to the impact of the crises and the actions of the ECB in response. The ECB have launched huge stimulus programs, as most Central Banks have, but the inclusion of sub-investment grade bonds (including Greek) may have struck a note of fear in many. Oil prices showed further signs of life ahead of the OPEC PLUS meeting tonight, the day before the G20 Finance Ministers meet. FOMC minutes reflected the resolution of the Fed and how the times were ‘profoundly uncertain’.

Commodity currencies were major beneficiaries of the rise in risk appetite, with the AUD jumping to 0.6235, while the NZD regained 0.6000. These commodity, trade exposed currencies, are enjoying the fall in the reserve currency plus the improved export situation. US markets lead the way overnight, as the withdrawal of Bernie Sanders overnight, provided some political certainty in a rising sentiment environment.

Weekly Market Calendar

6/4 NZ Commodity Prices, Australia Job Ads, German Factory Orders, German Construction

7/4 Australia Consumer Confidence, Australia Trade, RBA Cash Rate, Japan Leading Index, German Industrial Production

8/4 Japan Trade, Japan Current Account, US Weekly Mortgage Applications

9/4 NZ House Sales, FOMC Minutes, German Trade, German Current Account Exports/Imports, UK Industrial/Manufacturing Production, UK trade, UK Industrial/Manufacturing Production, US Weekly Jobless Claims

10/4 University of Michigan Economic Sent

Market Commentary 08/04

The Dow had opened the week full of confidence, surging more than 1600 points and followed this in early overnight trade with gains of a further 900 points. These gains have added nearly 25% to the Dow on coronavirus lows. Italy and Spain has seen falls in new cases and death rates have stabilised, while the New York hot spot appears to be cooling before any of the models predicted. This allowed a huge improvement in risk sentiment, forcing the Dollar lower and bond yields to rise. The mitigation taken to combat the coronavirus appears to be working and plans are now forming to return to work.

The fall in the US Dollar allowed the EUR to rebound strongly, to 1.0940, while the Yen traded 108.85. The GBP had been particularly damaged by the news that PM Johnson had the virus and was moved to hospital, but he appears to have stabilised and the GBP surged back to 1.2330. The ECB announced they would change further rules, agreeing to purchase sub-investment grade bonds, which will include Greek Bonds. I would imaging they will attract a lot of offers? President Trump is looking to extend the small business plan by $200 Billion, as demand is so high!

The RBA left rates unchanged and confirmed a ‘tapering’ bond purchase program. The RBA has been in the secondary bond markets buying bonds, but has said this will ‘taper’, as demand dictates. This combined with rising risk sentiment, rocketed the AUD back up to 0.6200, dragging the NZD on it’s coattails, with the NZD rising to 0.6000. The RBA and RBNZ are in the private and public sector debt market calming the waters, as treasury debt issuance breaks records, while analysts see ‘light at the end of the tunnel’.

Weekly Market Calendar

6/4 NZ Commodity Prices, Australia Job Ads, German Factory Orders, German Construction

7/4 Australia Consumer Confidence, Australia Trade, RBA Cash Rate, Japan Leading Index, German Industrial Production

8/4 Japan Trade, Japan Current Account, US Weekly Mortgage Applications

9/4 NZ House Sales, FOMC Minutes, German Trade, German Current Account Exports/Imports, UK Industrial/Manufacturing Production, UK trade, UK Industrial/Manufacturing Production, US Weekly Jobless Claims

10/4 University of Michigan Economic Sent

FX Overview

It’s business as usual for us at Direct FX with Dealing and Settlement functions running as per normal. If you need a quote please call or email us, we would love to hear from you.

Day twelve of the official NZ lockdown. 

  • The RBA meet today to discuss monetary policy and the official cash rate- the rate will remain on hold for an extended time- the consensus, but we could see tweaks to the RBA’s bond buying program suite of measures to combat the economic impact of coronavirus
  • Over the weekend RBNZ Governor Orr said the Reserve Bank can keep monetary support going for as long as necessary through the QE program and other tools available. “NZ is in a globally enviable fiscal position with significant headroom”.
  • Boris Johnson has been admitted to hospital 10 days after testing positive for Covid-19 and reportedly hooked up to a ventilator in intensive care
  • Ireland’s Prime Minister Varadkar has re-registered as a medical practitioner, he worked as a doctor before being a politician and intends to start working 1 shift per week
  • The latest coronavirus figures out of USA suggest that between 100,000 and 240,000 Americans will perish
  • Trump has purchased a huge amount of hydroxychloroquine claiming there are strong signs this works on coronavirus 
  • The Japanese government is close to finalising a covid-19 economic relief package
  • Italy have reported the lowest daily number of new coronavirus cases since the 19th of March with the number in intensive care also falling
  • PM Ardern says the NZ borders will probably remain closed until either the virus reaches herd immunity through an inability to be controlled or a vaccine is available. Hopefully it’s the latter, the lockdown won’t be ending early
  • Australia’s deputy Chief Medical Officer Paul Kelly commented saying – vaccines to combat coronaviruses “are not easy” and “in fact, up to now we’ve never had a successful vaccine against a coronavirus. It will be at least 12 possibly 18 months before a vaccine can be developed”.

Market Commentary 07/04

Global equity markets rebounded strongly overnight, as the number of deaths from the coronavirus slowed, allowing for some optimism. Italy and Spain have been overwhelmed with the infection, but the infection and death rates are slowing, allowing for speculation that they may have peaked. The US has also started to see a glimmer of hope, as the massive infection rates leasd by New York, may have peaked?

The good news was welcomed by markets and the commodity currencies were beneficiaries. The NZD pushed up to 0.5920, while the AUD approaches 0.6100, ahead of the RBA meeting held today. The Fed announced a new small business program, labelled the ‘Pay-check Protection Program’, while the RBNZ has an assistance program for the private sector called the (LGFA). Central Bank moves into private sector debt monetisation is a feature of these desperate days.

Boris Johnson remains in hospital overnight, which saw some early pressure on the GBP, but this stabilised and regained 1.2300. The EUR fell below 1.0800, while the Yen weakened to 109.00, awaiting confirmation of a bounce in risk appetite. Oil slipped back to $26/barrel, after the OPEC PLUS meeting was delayed from Monday until Thursday, ahead of the G20 Finance Minister meeting. Trump is heavily involved in negotiations behind the scenes, in an effort to cut supply to match the lower demand.

If the virus spread is beginning to slow, markets will now be looking for plans for business begin to resume to a more normal basis.

Weekly Market Calendar

6/4 NZ Commodity Prices, Australia Job Ads, German Factory Orders, German Construction

7/4 Australia Consumer Confidence, Australia Trade, RBA Cash Rate, Japan Leading Index, German Industrial Production

8/4 Japan Trade, Japan Current Account, US Weekly Mortgage Applications

9/4 NZ House Sales, FOMC Minutes, German Trade, German Current Account Exports/Imports, UK Industrial/Manufacturing Production, UK trade, UK Industrial/Manufacturing Production, US Weekly Jobless Claims

10/4 University of Michigan Economic Sent

Market Overview

Day nine of the official NZ lockdown. 

Currencies went from organised to chaotic Thursday but calmed again into Friday sessions.

This virus is extremely good at latching onto people. We are starting to understand the severity of how efficiently Covid-19 spreads. With more than 1million documented cases worldwide it’s become clear based on a recent study that up to 86% of people who contract the virus go undocumented. That is all those who either have no symptoms or mild symptoms and don’t feel the need to be tested. Here lies the problem – it’s these people who will go about their daily activities while inadvertently passing it onto others. In a city called Vo- Italy they carried out an experiment, everybody was tested, with alarming numbers confirming 60% of people were positive and had no symptoms. 

March local Business Confidence made for terrible reading. Headline business confidence dropped 45 points to a net 64% of surveyed reporting that they expect business conditions to deteriorate over the year ahead. You don’t say. When the report released last on the 27th of February confidence fell 6 points to a net 19% deterioration as a contrast. The 4-week lockdown in New Zealand is expected to now go longer and cause June quarter 2020 GDP to fall by around 14% with unemployment rising to over 10%

  • The latest coronavirus figures out of USA suggest that between 100,000 and 240,000 Americans will perish, Trump is considering cancelling flights to badly affected areas
  • Germany extends lockdown to April 19, Italy to April 13
  • British Airways is expected to stand down 36,000 staff
  • PM Ardern says the NZ borders will probably remain closed until either the virus reaches herd immunity through an inability to be controlled or a vaccine is available. Hopefully it’s the latter.
  • Australia’s deputy Chief Medical Officer Paul Kelly yesterday commented saying – vaccines to combat coronaviruses “are not easy” and “in fact, up to now we’ve never had a successful vaccine against a coronavirus. It will be at least 12 possibly 18 months before a vaccine can be developed”.

Kiwi Brushes Aside 0.6000

It’s business as usual for us at Direct FX- Dealing and Settlement functions are running as per normal. If you need a quote please call or email us.  We would love to hear from you.

There’s a strange calmness in the air – you feel it? No anxiety from industry, no panic to get anywhere, no time constraints, just a lockdown journey of human unification. Time stands still almost, perhaps a moment to smell the flowers, a time for reflection?

Day six of the official New Zealand lockdown. 

It’s been another massive week in currencies/global markets with central bankers struggling to come to terms with coronavirus headlines and weak economic data. 
US Dollar weakness Thursday continued into the weekly close, underperforming against the basket of majors, the index falling 4.5%. This marks one of the worst performing week’s since the 2008 GFC reversing the previous week’s 4.12% gain. The kiwi is nearly 6% higher, Aussie 6.12% and British Pound 6.93% on the week. The Fed announced an unlimited “QE” program as congress passed a USD $2Trillion bailout package, the biggest they have ever announced. With the virus spiralling out of control in the US – especially in NY where numbers have reached apocalyptic levels around 60,000 and the total number of deaths just over 1,000.    
The only local data this week is today’s ANZ Business Confidence which is expected to survey poor- the NZD could take a hit post release. The 4 week lockdown in New Zealand is expected to cause June 2020 GDP to fall by around 14% with unemployment rising to 9.0%. But…the recovery won’t be as long winded as other past recessions and 2008 GFC based on current measures in place by the Govt and RBNZ to cushion business and personal financial cost.
Markets opened Monday a lot more relaxed than the previous two weeks due to the safety of lockdown measures and financial measures in place. Movement into Tuesday has not been as wild as the previous two weekly starts- currencies almost look organised.


• New Zealand has added 58 to the infected today with our total infected cases now 647
• I’m struggling to work out why the world’s 2nd and 4th biggest countries by population – India and Indonesia only have around 1,600 cases of Covis-19, surely these numbers are inaccurate, the numbers being tested must be very low.
• PM Ardern says the NZ borders will probably remain closed until either the virus reaches herd immunity through an inability to be controlled or a vaccine is available. Hopefully it’s the latter.
• Crude Oil has been bearish for a few week’s now after Saudi Arabia started a price war and ramped up production, its trading at a 17 year low just off $20.00 a barrel.
• USA now tops the Covid-19 table with 162,835 infected cases and 3,128 deaths
• The US coronavirus Bill was passed yesterday as the US economy stares down one of the worst economic downturns in its history. The 2.2Trillion relief bill aimed at reducing the financial carnage caused by the Covid-19 pandemic

Major Announcements last week:

  • World coronavirus cases 784,381
  • Currency markets comparitively calmer this week

Economic Releases

Tuesday 31/03

  • 1pm, NZD, ANZ Business Confidence
    • Previous -19.4
  • 2pm, CNY, Manufacturing PMI
    • Forecast 44.9
    • Previous 35.7

Wednesday 01/04

  • 3am, USD, CB Consumer Confidence 
    • Forecast 115.1
    • Previous 130.7

Thursday 02/04

  • 115am, USD, ADP Non-Farm Employment Change 
    • Forecast -125k
    • Previous 183k
  • 3am, USD, ISM Manufacturing PMI
    • Forecast 46
    • Previous 50.1

Friday 03/04

  • 130am, USD, Unemployment Claims
    • Previous 3,283k

Saturday 04/04

  • 130am, USD, Average Hourly Earnings m/m
    • Forecast 0.20%
    • Previous 0.30%
  • 130am, USD, Non-Farm Employment Change 
    • Forecast -81k
    • Previous 273k
  • 130am, USD, Unemployment Rate
    • Forecast 3.80%
    • Previous 3.50%
  • 3am, USD, ISM Non-Manufacturing PMI
    • Forecast 48
    • Previous 57.3

FX Update

A range of major currencies continue to operate around multi year lows, some multi decade lows with investors scrambling for the safe haven US Dollar. The Australian Dollar was recently at an 18 year low.  

The Reserve Bank of New Zealand will buy NZ 30 Billion in government bonds over the following 12 months (QE program) in efforts to keep interest rates low as the coronavirus impacts the local economy. As the pandemic worsens risk aversion has resulted in stricter credit conditions and reduced the impact of recent interest rate cuts. The RBNZ has changed its mind for the time being on delivering negative rates. While we could still see rates at zero, the plan with QE now is a good one in which we should see increased liquidity/cash flow back into the economy. Jacinda Ardern announced alert level 3 yesterday moving to alert level 4 on Wednesday – Alert level 4 will remain in place for about 4 weeks. Infected cases increased to 102 Monday and to 155 today. Only essential businesses will remain open. The govt will raise the cap on its wage subsidy scheme which will inject a further $4Billion onto the economy over the next 11 weeks. There is an agreement with banks to provide support for people with mortgages and a business finance scheme for businesses for those impacted by covid-19, details of what this looks like will be announced over the coming weeks.  

Death rates continue to publish scary numbers and the health systems are well overloaded in Spain and Italy. More measures will come into place to self-isolate and more borders will close around the world. Japan’s Abe said they are looking at postponing the Olympics – very sad but it must be done as the safety of people cannot be guaranteed.

Economic Releases

Tuesday 24/03

  • 915pm, EUR, French Flash Services PMI
    • Forecast 39.6
    • Previous 52.5
  • 930pm, EUR, German Flash Manufacturing PMI
    • Forecast 40.1
    • Previous 48
  • 930pm, EUR, German Flash Services PMI
    • Forecast 43
    • Previous 52.5
  • 1030pm, GBP, Flash Manufacturing PMI
    • Forecast 45.1
    • Previous 51.7
  • 1030pm, GBP, Flash Services PMI
    • Forecast 45
    • Previous 53.2

Wednesday 25/03

  • 245am, USD, Flash Manufacturing PMI
    • Forecast 45.1
    • Previous 50.7
  • 10pm, EUR, German Final ifo Business Climate
    • Forecast 87.9
    • Previous 87.7
  • 1030pm, GBP, CPI y/y
    • Forecast 1.60%
    • Previous 1.80%

Friday 27/03

  • 1am, GBP, MPC Official Bank Rate Votes
    • Forecast 0-0-9
    • Previous 0-9-0
  • 1am, GBP, Monetary Policy Summary
  • 1am, GBP, Official Bank Rate
    • Forecast 0.10%
    • Previous 0.10%
  • 130am, USD, Unemployment Claims
    • Forecast 750k
    • Previous 281k