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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

FX Overview

Financial Markets continue to take on water, lots of water. The carnage going on out there is seen as biblical with investors not knowing what to do or how to react.

The New Zealand Dollar and the Australian Dollar have come off nearly 7% against the big Dollar this week. The kiwi traded over parity versus the Aussie overnight Wednesday to 1.0005 but was quickly sold back to 0.9930- investors not quite ready yet for the parity party. The English Pound has also sold down 5.4% over the week against the USD as coronavirus cases ballooned out Tuesday, the Loonie (CAD) also down 5.0% as Trump closes down the Canadian Border. 

The high cost by Americans to get tested for Covid-19 is exposing the cracks in the health system with many reluctant to get tested. Eight weeks in there is still not enough test kits available for anyone who needs them. The number of tests per day the US can run is around 7,000 before labs are overrun. 28 Million people excluding the elderly have no health cover in the USA. Uninsured workers will have a greater risk of exposure to the disease as most cannot afford to stop working. US taxpayers will fund the majority of non-insured people who need testing for the virus. US Congress is trying to pass legislation that would require employers to provide paid sick leave during any public crisis. If you have health cover these that are being tested are still ending up with $1,400 style bills after insurance has paid the difference.    

As the virus spreads through 3rd world countries such as India, Bangladesh and Nepal these countries will face massive issues as the ability to carry out testing will be massively limited. With only the sickest to be tested the virus will not be stopped.

It’s a foregone conclusion that the recession in NZ will be deeper than the GFC of 2008 with GDP to decline -3.0% from -2.7% in 2008-2009.  Unemployment is expected to rise above 5.0% with new numbers of unemployed increasing over 40,000 people. We think that the RBNZ will start quantitative easing measures within a week to keep rates low. It is said that banks are in a good financial position and should weather the storm of what’s to come. The only problem is the sheer amount of consumer and business debt and loan defaults which will inevitably happen as unemployment rises and businesses close. 

Jacinda Ardern announced gatherings of 100 people or more have been cancelled. These restrictions do not include Schools, workplaces or supermarkets of public transport. Not sure about others but when I get off my train arriving into work every morning it has over 500 people. The Govt needs to do more, it’s time to ditch the NZ “she’ll be right” attitude and close nearly everything down or our local virus numbers will blow out. Last night’s full border closure announced by Ardern is unprecedented and will go a long way.  

The ECB have announced a 750B pandemic emergency plan. The ECB will buy up Govt Bonds to combat the virus and slow down the effect on the economy. The ECB said the programme which includes all asset categories under the “asset buying programme” will only run until the effects of the coronavirus are under control. The news drove the Euro higher across the board.

The Reserve Bank of Australia cut rates 25 basis points to 0.25% yesterday, Lowe saying he won’t increase again until progress is made towards full employment. The RBA will start buying govt Bonds from today pumping liquidity into financial markets. The new three year funding facility for banks is worth over 90B which is designed at ultimately providing cheaper loans to bank customers. Australia will close its borders to non-residents from 9pm today. 

FX Update

The Melt down in Financial Markets continued into Monday following last week’s massive sell off in just about every financial instrument since the 2008 Global Financial Crisis. 

The RBNZ cut rates at 8am Monday morning from 1.00% to 0.25% in an unscheduled announcement. Last week Orr said he would not need to make a one off policy meeting announcement but with the Covid-19 impacting just about everyone, the central bank decided to cut sooner rather than the scheduled 25th March outing. Prime Minister Ardern announced travel restrictions over the weekend that require all people travelling into the country to self-isolate for 14 days. The New Zealand tourism industry is expected to grind to a halt with NZ expected to dip into recession for as long as the virus remains uncontrolled. If a May QE program was necessary from May this would undoubtedly put downward pressure on the NZD. NZ second quarter GDP is expected to come in much lighter as the economic fallout takes a toll. An economic “business fiscal package” is to be announced today at 2pm by Jacinda Ardern and is said to be significant.  

Spain and France have announced emergency restrictions like Italy banning people from public gatherings. The epicentre is now Europe with this region being in the centre of the coronavirus epidemic. 

The Federal Reserve cut interest rates Monday morning from 1.25% to 0.25% saying they expect to maintain rates near zero until the economy returns to pre-coronavirus status. Pulling the March 18 meeting forward Powell said the economy was on a “strong footing” ahead of Covid-19 but would use a full range of tools at their disposal to ease the impacts and announced quantitative easing with at least $700B of intended asset purchases.   

Risks of another rate cut by the RBA are rising given aggressive pricing moves by other central banks. The next meeting is 7 April but we have little chance of making it this far with the way coronavirus continues to spread. In a Reserve Bank statement the RBA said they are ready to purchase Australian Govt Bonds as part of a new Quantitative Easing incentive. This put the Australian Dollar under further massive pressures dropping to 0.6100 levels. 

The Bank of Canada has also made an emergency cut to their interest rate Friday fresh from their March 4th cut to 1.25%, they have cut a further 50 basis points to 0.75% to counteract the impact of coronavirus. This has been seen as a proactive measure by the BoC in light of rapid recent falls to Crude Oil prices and how it has affected Canada’s economy. This is the first time the central bank has moved the rate since 2009 GFC outside the normal monetary policy meetings. The next scheduled rate decision is April 15th.  

A shock rate cut of 50 points to 0.25% by the Bank of England’s (BoE) Mark Carney delivered a strong message that he wants to ward off chances of a UK recession. Pressures to prop up the economy to mitigate the economic impact of coronavirus have raised questions on how effective a short term rate cut would be on the UK economy. UK’s budget finance Minister Sunak has set aside a GBP30B package to tackle the coronavirus outbreak and get the country through some tough times ahead.

Economic Releases

Below are the weekly economic releases for this week (NZT)

Monday 16/03

  • 8am, NZD, Official Cash Rate
    • Previous 1.00%
    • Actual 0.25%
  • 8am, NZD, RBNZ Rate Statement
  • 10am, USD, FOMC Statement
  • 10am, USD, Federal Funds Rate
    • Previous <1.25%
    • Actual <0.25%
  • 1017am, USD, President Trump Speaks
  • 11am, NZD, RBNZ Press Conference
  • 1130am, USD, FOMC Press Conference
  • 3pm, CNY, Industrial Production y/y
    • Forecast -3.00%
    • Previous 6.90%
  • Tentative, JPY, BOJ Policy Rate
    • Previous -0.10%
  • Tentative, JPY, Monetary Policy Statement 
  • All Day, All, G7 Meetings 

Tuesday 17/03

  • 130pm, AUD, Monetary Policy Meeting Minutes
    • Forecast 1.1%
    • Previous -0.2%
  • 11pm, EUR, German ZEW Economic Sentiment 
    • Forecast -25
    • Previous 8.7

Wednesday 18/03

  • 130am, USD, Core Retail Sales m/m
    • Forecast 0.20%
    • Previous 0.30%
  • 130am, USD, Retail Sales m/m 
    • Forecast 0.20%
    • Previous 0.30%

Thursday 19/03

  • 130am, CAD, CPI m/m
    • Previous 0.30%
  • 7am, USD, FOMC Economic Projections
  • 7am, USD, FOMC Statement 
  • 7am, USD, Federal Funds Rate
    • Forecast <0.25%
    • Previous <0.25%
  • 730am, USD, FOMC Press Conference
  • 1045am, NZD, GDP q/q 
    • Forecast 0.50%
    • Previous 0.70%
  • 130pm, AUD, Employment Change
    • Forecast 8.5k
    • Previous 13.5k
  • 130pm, AUD, Unemployment Rate
    • Forecast 5.30%
    • Previous 5.30%
  • Tentative, JPY, Monetary Policy Statement

Friday 20/03

  • All Day, JPY, Bank Holiday 

Saturday 21/03

  • 130am, CAD, Core Retail Sales m/m 
    • Previous 0.50%

FX Update

Is it financial armageddon?

Coronavirus is officially out of control with the World Health Organisation declaring it a Pandemic overnight Wednesday. Numbers continue to balloon out with 125,000 people affected now and 4,600 deaths worldwide.

Whatever they are doing in Italy is clearly not working with the govt ordering all shops to close except groceries and pharmacies.  Prime Minister Conte said if cases continue to rise this doesn’t mean tighter restrictions. Rome residents are still out and about socialising (coming from someone in Rome) which may explain things.  People have initially ignored the warning alarms and ignorantly gone about their normal daily lives. US President Trump has made face masks available to healthcare workers – wow, this is a sign the US has now started to treat the virus seriously. Trump also announced a travel ban from all incoming flights from Europe for 30 days beginning today. 

Adrian Orr said he has not, and still does not need to use alternative monetary policy instruments to alleviate any such potential strain to the New Zealand economy.  The concern at the moment is how much GDP will be affected over the coming months with the significant slowdown in global demand taking form. Words like uncertainty, fear, slowdown and risks are being bandied around not just locally but globally. Central banks over the coming months could end up close to, or at zero interest rates as recession woes weigh heavy. There is still a chance the RBNZ could announce an emergency meeting and ease monetary policy from the current 1.0%.

Australia announced a fiscal economic package worth A$22.9B (over the next two years) or 1.2% of GDP with A$11B to be dispersed before 30 June this year to boost efforts in the war against Covid-19 to stop the country sliding into recession.   

A shock rate cut of 50 points to 0.25% by the Bank of England’s (BoE) Mark Carney delivered a strong message that he wants to ward off chances of a UK recession. Pressures to prop up the economy to mitigate the economic impact of coronavirus have raised questions on how effective a short term rate cut would be on the UK economy. UK’s budget finance Minister Sunak has set aside a GBP30B package to tackle the coronavirus outbreak and get the country through some tough times ahead.

Oil Prices Collapse Causes Currency Meltdown


Australia’s Central Bank cut rates by 25 basis points to 0.50% as widely expected last week. With references made to Bushfires, phase one trade deal and the impact of coronavirus to the economy high on the agenda. The RBA are prepared to cut rates further if necessary as the economy responds to the global coronavirus outbreak. The government saying the coronavirus has “clouded the near-term outlook.” Other Australian data released over the week was poor with Building Approvals and Current Account both coming in below expectations. The Aussie Dollar though has been held up by general weakness in the US Dollar although yesterday’s “flash crash” has changed the game somewhat with the currency reaching 0.6315 momentarily (a massive sell off) before recovering around 0.6600.

New Zealand

Local attention has focused on Coronavirus over recent weeks especially with a lack of data publishing. New Zealand reported its 5th case of the virus with travel bans becoming more common. Consumer and business confidence is taking a hit, this week’s ANZ business confidence survey should confirm this.  This disruption to the local economy is expected to be only short term with no long period forecast for worsening GDP. March quarter is expected to show negative growth with the forecast for 2020 expected to be around 1.9% from a pre coronavirus 2.7%. The housing market should also grind to a halt through to mid this year as a result of job losses resulting in a slump in household incomes. The recovery according to the NZ govt should resume in the second half of this year. Later in March the RBNZ will drop the cash rate to 0.75% and possibly again in May. Word is Ore speaks today and could hint at dropping the cash rate before then.

United States

The US Dollar fell sharply against some of its major rival currencies in volatile trade. Yields fell affecting the Dollar’s buying power even after better than expected NFP figures came in better than expected failing to spark big Dollar buying. Non-Farm Payroll posted 275,000 new employed people from the anticipated 175,000 and the Unemployment Rate dropped to 3.5% from 3.6%.  The Federal Reserve cut rates by 0.50 points to 1.25% Wednesday during their emergency policy meeting and it looks like they will now cut again by 0.50% this month on the 19th. This should reduce the attractiveness of investors buying USD in the long term and should depreciate the USD further. CPI is this week’s focus.


The Euro has started a new period recently matching the Japanese Yen as the new safe haven currency investors want to hold. In the month of March the Euro has been the strongest currency along with the Yen. Against the US Dollar the single currency has risen from depths of 107.50 to 1.1350 – a massive shift in sentiment.  Analysts are expecting the pair to rise to 1.40 levels. With Europe being a big lender to the rest of the world at cheap near zero borrowing rates it has become the currency of choice as a liability. The Euro has become the global provider of liquidity and behaves like a “carry trade” i.e. borrowing at low cost and investing this asset in a higher rate of return. The ECB meets later in the week to discuss policy and coronavirus fighting measures. If we see price in the EURUSD push higher than 1.15-1.20 levels this week a cut will be substantiated.

Coronavirus continues to spread through Italy with deaths increasing to 133 to a total of 463. The number of infections has increased by nearly 50% to 9,172. Italy has enforced incredible measures in attempts to contain the virus by locking down 16 Million people in Lombardy and 14 other provinces. The restrictions will stay in place until the 3rd of April.

United Kingdom

The British Pound has outperformed amid coronavirus related market fears. The Bank of England monetary response to coronavirus recently was one of calmness. Mark Carney, the outgoing Governor and his successor said they were ready to intervene but seemed to be in no hurry to cut rates as other central banks have done. Further rises in the Pound across the pairs could be capped by Brexit activity in the background. Talks in Brussels have been encouraging recently but turned a tad sour over the weekend when chief EU negotiator Barnier said they may find it difficult to reach an agreement by year end.  Monthly GDP for January prints Wednesday with expectations of 0.2% growth down from 0.3% in December 2019


Black Monday. A “flash crash” in the Japanese Yen cross currencies took the Yen down between 5-8% in minutes with commodity risk currencies particularly hit hard. Some say the stars were aligned the second markets opened Monday morning in what turned out to be the perfect storm. Coronavirus caused widespread panic as the prospects of obtaining a cure, or any good news over the next couple of months looked slim. It became apparent that anyone holding risk assets was not going to get any return so they got out, cut losses and escaped any further pain down the track – and fast.  The Japanese economy also took bad news to the markets Monday with lower than estimated December 2019 growth figures surprising investors shrinking an annualised 7.0% compared to the 6.3% estimate. Bank of Japan’s Iwahara expects the Japanese economy to fall 0.6% this year based on coronavirus supply chain and tourist numbers.


Oil prices have suffered huge weekend losses. Opening Monday around $33.00 from Friday’s close at $41.55 per barrel this is a decline of over 21% the biggest price move in recent history. Russia has refused to lower production and Saudi Arabia announced drastic price cuts in somewhat a declaration of war on price after OPEC fell apart on Russia’s refusing to lower production. They have also made comments that they will increase oil production by 2 million barrels per day. The news has in turn had a massive effect on the Canadian Dollar – all crosses against the Loonie (CAD) have depreciated large.

Major Announcements last week:

  • Crude Oil drops over 20% 
  • RBA cuts the cash rate to 0.50%
  • Federal Reserve Bank cuts rates 50 points to 1.25%
  • Bank of Canada cut rates 50 points to 1.25%
  • US Non Farm Payrol figures increase by 273,000
  • US Unemployment drops to 3.5%
  • Coronavirus cases increase to over 110,000

Economic Releases

Below are the weekly economic releases for this week (NZT)

Tuesday 10/03

  • 2pm, NZD, RBNZ Gov Orr Speaks

Thursday 12/03

  • 1230am, GBP, Annual Budget Release
  • 130am, USD, CPI m/m
    • Forecast 0.00%
    • Previous 0.10%
  • 130am, USD, Core CPI m/m
    • Forecast 0.20%
    • Previous 0.20%

Friday 13/03

  • 1.45am, EUR, Main Refinancing Rate
    • Forecast 0.00%
    • Previous 0.00%
  • 145am, EUR, Monetary Policy Statement
  • 230am, EUR, ECB Press Conference

FX Update: Financial markets infected with a serious case of Coronavirus

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With extreme levels in many currency pairs it’s a good time to price up an option. Please let us know if this is of interest and we are happy to speak to anyone who is interested.

Markets felt better heading into the second half of the week as market punters welcomed increased signs of countries coordinated efforts in the fight against Covid-19 and Super Tuesday achievements by Vice President Joe Biden. Sentiment improved as Biden won a majority of state primaries in the race to become the Democratic Presidential nominee. A more centrist Democrat candidate has provided comfort to investors with equity markets climbing over 4% reversing most of the early week losses. 

The Federal Reserve cut rates 50 points to 1.25% Wednesday in an emergency policy meeting but left the door open for further easing. We see further cuts needed by the Fed with chances of a 25 point cut by April and another 25 points by June. Fundamentals of the US economy remain strong but with virus fears and concerns this will weigh on economic activity in the US and around the world for several months. FOMC’s Mester also noted that coming into the current coronavirus situation this year the government was “on a good footing” with solid growth and inflation on track towards 2.0% – but now this outlook is somewhat uncertain.    

Australia’s Central Bank cut rates by 25 basis points to 0.50% as widely expected Tuesday. With references made to Bushfires, phase one trade deal and the impact of coronavirus to the economy high on the agenda. The RBA are prepared to cut rates further if necessary, as the economy responds to the global coronavirus outbreak. The government saying the coronavirus has “clouded the near-term outlook.” Other Australian data releases this week have been poor with Building Approvals – seasonally adjusted down 15.3% for January 2020. The AUD against the US Dollar rose off recent lows to 0.6300 a clear sign the currency has been well oversold recently based on coronavirus headlines.

The Bank of Canada also eased monetary policy Thursday lowering their cash rate half a percent to 1.25% from 1.75% the BoC signalling they would ease again in direct response to coronavirus worries if the economic toll on the economy worsens. The BoC also went on to say if the coronavirus outbreak subsides they would look at raising rates again later in the year. The coronavirus has led to a sharp decline in business activity causing the Loonie (CAD) to depreciate over 1.2% against the US Dollar and over 2.0% versus the Japanese Yen.

Attention is with tomorrow’s US Non-Farm Payroll release and February Unemployment Rate which is expected to fall in line with last month’s 3.6% 

Financial markets infected with a serious case of Coronavirus

Over the past week, economic data from most countries has taken a back seat to concerns around the expanding Coronavirus epidemic. The rapid drop off in economic activity in China, and its effect on supply chains around the world, spooked global stock markets with US equities leading the sell off. All three US benchmark indexes declined around 11% or 12% percent from their recent peaks. This has led to many forecasters now calling for interest rate cuts from most major central banks. There is even speculation that we could see coordinated central bank action in the coming weeks, much like we saw during the 2008 financial crisis. First out of the blocks however is going to the Reserve Bank of Australia, as their regular interest rate decision is scheduled for this afternoon. A cut from the RBA is widely expected with interest rate markets now fully pricing it in.

Only time will tell how this epidemic will evolve. But one thing is for sure, the longer it goes on the more damage is done to global economic activity. How some industries will cope, or how long individual business can survive, when 70% or more of their activity dries up overnight, is anyone’s guess. Many businesses in China are reporting they only have around 3 months before cash reserves run out. The global economic recovery from this sudden shock to the system is going to take a lot longer to recover from that the actual epidemic itself.

Major Announcements last week:

  • US Consumer Confidence 130.7 vs 132.6 expected
  • ANZ NZ Business Confidence -19.4 vs -13.2 last
  • Australian Private Capital Expenditure -2.8% vs 0.5% expected
  • Canadian GDP 0.3% vs 0.1% expected
  • Chinese Manufacturing PMI 35.7 vs 45.1 expected
  • US ISM Manufacturing PMI 50.1 vs 50.5 expected