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Successful Covid-19 vaccine trials lifts mood

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.  
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.


• US Retail Sales for April plummeted 16.4% worse than the -12% expected by analysts, this follows the March decline of -8.4%
• Japan’s first quarter GDP estimate printed at -0.9% (-1.1% expected) following last quarter 2019 figures of -1.8% putting Japan in recessionary territory. 
• The IMF expects a decline to global growth not seen since the Great Depression of the 1930’s with annual growth expected to drop to -3.0% in 2020
• After last week’s RBNZ QE increase from 33B to 60B – ANZ now predict the RBNZ will increase the package to 90B in the second half of this year
• Expectation that the RBNZ may again drop the cash rate lower than the current 0.25% were quashed in last week’s statement, saying they would leave the rate unchanged until at least March 2021
• The lowest number of Americans filed for unemployment at 2.9M for the week ending 10 May since the pandemic coronavirus started 2 months ago, this brings the total number of Americans to lose their jobs in the past 8 weeks to 36M
• Crude Oil prices continue to lift though 32.00 per barrel – some are picking a demand shortage in the coming weeks
• The Australian economy got a wake up call after 595,000 national jobs (expected 575,000) were lost in April to Covid-19

Major Announcements last week:

  • Aussie Unemployment jumps to 6.2% from 5.2%
  • US Retail Sales for April down -16.4% (-8.3% for March)
  • RBNZ leave Cash Rate unchanged at 0.25%
  • Japan Economy slips into resession

Market Update

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. The Government approved an extra 30B to be added to the Covid-19 recovery plan in addition to the 30B announced in March. In the wake of coronavirus the government made it clear there would be a sharp slunk to the economy in the coming months with a big focus on jobs. Unemployment is forecast to rise to 8.3% y/y ending June 2020 but peak in September 2020 at 9.8% before recovering. GDP is forecast to increase to -4.6% y/y to June 2020 from 2.8% in the year ending June 2019 before recovering. The fiscal debt spending to help the economy react to the effects of coronavirus is expected to send net debt to 53% of GDP by 2023.

The IMF expects a decline to global growth not seen since the Great Depression of the 1930’s with annual growth expected to drop to -3.0% in 2020
The Italian Govt has signed off on a 55B stimulus package with most Italians to receive emergency income
Rising tensions between China and the US could affect Aussie dollar values, fallout in the Chinese economy could bring about a bearish tone
The Lowest number of Americans filed for unemployment at 2.9M for the week ending 10 May since the pandemic coronavirus started 2 months ago, this brings the total number of Americans to lose their jobs in the past 8 weeks to 36M
The Bank of England’s Bailey confirmed the central bank would roll out more govt bond purchases after saying the UK economy has moved into a sharp recession
The US Unemployment rate jumped to 14.7% the highest of record since the 1940’s
The Australian economy got a wake up call after 595,000 jobs (expected 575,000) were lost in April to Covid-19
President Trump has said “think we will have a vaccine by end of year”

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

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%

Thursday 14/05

  • 130pm, AUD, Employment Change
    • Forecast -550.0k
    • Previous -5.9k
  • 130pm, AUD, Unemployment Rate
    • Forecast 8.30%
    • Previous 5.20%
  • 2pm, NZD, Annual Budget Release 
  • 1030pm, GBP, BOE Gov Bailey Speaks

Friday 15/05

  • 1230am, USD, Unemployment Claims
    • Previous 3169k
  • 6pm, EUR, German Prelim GDP q/q
    • Forecast -2.30%
    • Previous 0.00%

Saturday 16/05

  • 1230am, USD, Retail Sales m/m
    • Forecast -11.00%
    • Previous -8.7%

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. 

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FX Update

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.

  • Japanese Bank Holiday Monday with the celebration of Greenery Day and Children’s Day made for thin markets
  • US President Trump says a vaccine is close but markets know better than to rely on his vague and misleading comments
  • Trump also says if China don’t continue to buy US products, he will cancel phase 1 of the trade deal between the US and China
  • Some countries are starting to experience a second wave resurgence of Covid-19 cases 
  • Qantas airlines has extended flight cancellations from the end of May through to the end of July amid coronavirus fears
  • NZ GDP may rise faster now that we have entered level 3 and no-doubt soon to be level 2 with some hope, this should indicate better numbers starting in the September- 3rd quarter, with GDP expected to be around 13%
  • Westpac Bank expects the RBNZ to cut its benchmark rate to -0.5% in the November policy meeting
  • Italy’s infection count has started to plateau, but death rates in the US continue to be over 1,000 per day with no sign of levelling
  • UK Covid-19 deaths rise 586 compared to 300 yesterday, while Spain aims for end of June to return to normal    
  • Companies around the world are in a race to invent a vaccine for coronavirus with human trials being rushed through at a worrying pace with trade-offs between safety and speed

Economic Releases

Tuesday 05/05

  • All Day, JPY, Bank Holiday
  • 430pm, AUD, Cash Rate 
    • Forecast 0.25%
    • Previous 0.25%
  • 430pm, AUD, RBA Rate Statement
  • Tentative, EUR, German Constitutional Court Ruling

Wednesday 06/04

  • 1230am, CAD, Trade Balance
    • Forecast -2.2B
    • Previous -1.0B
  • 2am, USD, ISM Non-Manufacturing PMI
    • Forecast 37.5
    • Previous 52.5
  • 1045am, NZD, Employment Change q/q
    • Forecast -0.20%
    • Previous 0.00%
  • 1045am, NZD, Unemployment Rate 
    • Forecast 4.40%
    • Previous 4.00%
  • All Day, JPY, Bank Holiday 
    • Forecast 0.30%
    • Previous 0.40%

Thursday 07/04

  • 1215am, USD, ADP Non-Farm Employment Change 
    • Forecast -20,000k
    • Previous -27,000k
  • 130pm, AUD, Trade Balance
    • Forecast 6.40B
    • Previous 4.36B
  • 3pm, NZD, Inflation Expectations, q/q
    • Previous 1.93%
  • 6pm, GBP, BOE Monetary Policy Report 
  • 6pm, GBP, MPC Official Bank Rate Votes
    • Forecast 0-0-9
    • Previous 0-0-9
  • 6pm, GBP, Monetary Policy Summary
  • 6pm, GBP, Official Bank Rate
    • Forecast 0.10%
    • Previous 0.10%

Friday 08/05

  • 1230am, USD, Unemployment Claims
    • Forecast 3000k
    • Previous 3839k
  • 130pm, AUD, RBA Monetary Policy Statement
  • All Day, EUR, French Bank Holiday 
  • All Day, GBP, Bank Holiday

Saturday 09/05

  • 1230am, CAD, Employment Change
    • Forecast -5,000.0k
    • Previous -1010.7k
  • 1230am, CAD, Unemployment Rate
    • Forecast 20.00%
    • Previous 7.80%
  • 1230am, USD, Average Hourly Earnings m/m
    • Forecast 0.30%
    • Previous 0.40%
  • 1230am, USD, Non-Farm Employment Change
    • Forecast -21,000k
    • Previous -701k
  • 1230am, USD, Unemployment Rate
    • Forecast 16.00%
    • Previous 4.40%

International Trade

FX Update

Day 2-  Level 3 NZ lockdown. 

A wave of optimism filled the air Monday with investors feeling comfortable around risk investments as countries around the world start to relax Covid-19 restrictions. The New Zealand Dollar has held its ground over the 0.60 mark, but the success story of late has been the Australian Dollar. The AUD has been the strongest performer not just over the past week but it has outperformed all its peers since April 6th and continues to be well supported. Coronavirus results have not only been extremely good (bit of luck perhaps) but Chinese data has also been favorable, boosting prospects of economic trade between the two countries. With supply chain disruption subsiding and a number of large companies back online things are starting to improve. Both NZ and Australia remain susceptible to mood changes and massive downturn in economic activity with huge monetary and fiscal stimulus still required to prop things up. But for now both the NZD and AUD are being driven higher.         

  • NZ Trade Balance published at 672M surplus for March compared to 686M expected
  • Global cases of Covid-19 surpassed a massive milestone 3Million with the number of worldwide cases doubling since April 05
  • A large number of countries are seeing second wave resurgences of Covid-19 cases 
  • Boris Johnson dashed hopes that the UK economy would open up after saying he could not take the chance on further outbreak of coronavirus cases
  • NZ GDP may rise faster now that we have entered level 3 and no-doubt soon to be level 2 with some hope, this should indicate better numbers starting in the September quarter with GDP expected to be around 13%
  • Westpac Bank expects the RBNZ to cut its benchmark rate to -0.5% in the November policy meeting
  • The Bank of Japan increased its Government Bond buying program increasing it to 340B Yen from 320B previously
  • Japan’s jobless for March came in at 2.5% as expected
  • Italy’s infection count is the lowest in 7 weeks with 1739 new cases compared to 2324 on Sunday
  • UK Covid-19 deaths rise 586 compared to 300 yesterday, while Spain aims for end of June to return to normal    
  • 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. 
  • The number of potential Covid-19 vaccines currently in development around the world is around 70

Economic Releases

Tuesday 28/04

  • 930am, USD, President Trump Speaks

Wednesday 29/04

  • 2am, USD, CB Consumer Confidence
    • Forecast 88.2
    • Previous 120
  • All Day, JPY, Bank Holiday
  • 130pm, AUD, CPI q/q
    • Forecast 0.20%
    • Previous 0.70%
  • 130pm, AUD, Trimmed Mean CPI q/q
    • Forecast 0.30%
    • Previous 0.40%

Thursday 30/04

  • 1230am, USD, Advance GDP q/q
    • Forecast -3.90%
    • Previous 2.10%
  • 6am, USD, FOMC Statement
  • 630am, USD, FOMC Press Conference
  • 1pm, CNY, Manufacturing PMI
    • Forecast 51
    • Previous 52
  • 1145pm, EUR, Main Refinancing Rate
    • Forecast 0.00%
    • Previous 0.00%
  • EUR, Monetary Policy Statement 

Friday 01/05

  • 1230am, CAD, GDP m/m
    • Forecast 0.00%
    • Previous 0.10%
  • 1230am, EUR, ECB Press Conference 
  • 1230am, USD, Unemployment Claims
    • Forecast 3500k 
    • Previous 4427k
  • All Day, CNY, Bank Holiday
  • All Day, EUR, French Bank Holiday
  • All Day, EUR, Italian Bank Holiday 

Saturday 02/05

  • 2am, USD, ISM Manufacturing PMI
    • Forecast 36.7
    • Previous 49.1