Update To Westpac’s RBNZ OCR Forecast – Enough Is Enough
We now expect the OCR to remain on hold for the foreseeable future (previously we expected two cuts this year).
The OCR needs to remain very low due to low inflation and high unemployment.
But recent strong GDP and housing data suggests that the OCR is now low...
New Zealand GDP Review, September Quarter 2020
GDP rose by 14% in the September quarter, a stronger than expected rebound from the Covid-19 lockdown in the previous quarter.
Overall activity is now slightly above pre-Covid levels, with some sectors powering ahead while others remain soft as a result of the international border closure.
Fiscal and...
Sterling Accelerates Lower as No-Deal Brexit Looking Very, Very Likely
Sterling's selloff accelerates further today after leaders from both EU and UK admitted that their negotiations positions are still part. No-deal Brexit is now seen as the most likely scenario, and we should know very soon by the end of Sunday. Dollar and Yen recover mildly today, on mild...
Australian Dollar Accelerates Up with Iron Ore Prices, Euro Capped after Post ECB Rally
Accelerating rally in iron ore prices pushes Australian broadly higher today, on the back of steadily firm risk sentiment. The Aussie is currently the strongest one for the week, followed by New Zealand Dollar, while Canadian is not far away, with help from oil prices. Sterling remains the worst...
RBNZ Orr: Adding house prices considering could make monetary policy less effective
RBNZ published a detailed response to request from Finance Minister Grant Robertson regarding adding consideration of house prices into monetary policy. Governor Adrian Orr warned, "adding house prices to the monetary policy objective would be unique internationally, which could make monetary policy less effective and impact financial market efficiency."
Instead,...
After the Vaccine Boost, What’s Next for the Commodity Dollars?
It’s been a roller-coaster year for the commodity-linked dollars of Canada, Australia and New Zealand as the global pandemic has wreaked havoc on international trade and on commodity prices – the lifelines of the three economies. But as countries around the world make progress towards recovering from the once-in-a-generation...
Sterling Hammered on Brexit Uncertainty, Swiss Franc Surges
Selloff in Sterling is the main theme for today. UK become the first country to approve Pfizer-BioNTech coronavirus vaccine and shots are due next week. But the good news was overshadowed by Brexit uncertainties. As the negotiation deadline looms it's reported that EU is insisting not rushing to a bad...
RBNZ Orr: Actual use of negative rates depends on economic context at the time
RBNZ Governor Adrian Orr said in a speech that "monetary policy has been effective to date in supporting both inflation and employment as intended – at least at the aggregate level."
New monetary policy tools will become "increasingly mainstream" in environment of low global inflation and low neutral interest rate.....
Cliff Notes: A Holiday Season Unlike Any Other
Key insights from the week that was.
This week saw the release of Australian partial data related to next week’s Q3 GDP report. Meanwhile, in the US and Europe, the focus remained on COVID-19’s spread and how it can be suppressed.
The construction work done survey was the first of two...
NZ Dollar Knocking on 0.70 Doorstep
The New Zealand dollar has recorded slight gains in Wednesday trade. Currently, NZD/USD is trading at 0.6991, up 0.24% on the day. On the fundamental front, New Zealand’s trade deficit is expected to drop to NZ$500 million, down from NZ$1.01 billion beforehand.
Finance Minister request to RBNZ boosts NZD
Investors and...
Dollar Falling Towards Key Near Term Support Levels after Mixed Data
Dollar's sell-off slowed mildly as stocks turned into consolidation ahead of Thanksgiving holiday in the US. But for now, the greenback remains the second worst performing for the week, just next to Yen, followed by Swiss Franc. Commodity currencies are strongest together with Sterling. Mixed economic data from US...
Full Risk-On Market With Upside Breakout in DOW and Oil
Markets are in full risk-on mode for now, with DOW closing above 30k handle for the first time overnight. Asian stocks are also generally higher, with strong rally in Nikkei and HSI. WTI oil prices powered through a key near term resistance level while Gold is set to break...
RBNZ Orr: Financial system not been tested as severely as it could have been
RBNZ Governor Adrian Orr said the New Zealand economy has been "relatively resilient" to the economic shock from the pandemic so far. The financial system "has not been tested as severely as it could have been". However, he warned, "businesses domestically and internationally face ongoing challenges as fiscal support...
New Zealand Asks for Help, NZD Likes It: NZD/USD, NZD/JPY, EUR/NZD
Early in today’s Asian session, New Zealand’s Finance Minister Grant Robertson wrote to RBNZ Governor Orr and asked him to factor in house price stability when considering monetary policy. As a result of lower interest rates, housing prices in New Zealand have skyrocketed and the government is receiving some...
Euro Resilient Despite Deterioration Business Expectations, Dollar Mixed
Commodity currencies remain the strongest one for today with help from risk-on markets. Euro is also firm, shrugging off deterioration in business expectations as indicated by Ifo's data. Though, selling is focusing on Swiss Franc and Sterling for now. Dollar dropped notably earlier today but there is no clear...
NZD Jumps As Negative Rates Unlikely
The New Zealand dollar has soared in Tuesday trade. Currently, NZD/USD is trading at 0.6984, up 0.89% on the day. In the Asian session, NZD/USD crossed above the psychologically significant 0.7000 level, for the first time since June 2018.
Finance Minister request to RBNZ boosts NZD
A letter from New Zealand’s...
Dollar Comeback Falters, Gold Gets Burned
US PMIs show economy firing up, dollar bounces but falls back
Stocks power higher, yet the Fed remains a wild card
Kiwi cheers potential changes to RBNZ mandate
Gold burned by stronger greenback
Strong PMIs send ripples across markets
A perfect storm of encouraging news has engulfed global markets early...
The Significant Intraday Dollar Retracement From The Sharp Rise Yesterday Suggests That The USD Remains Weak
Markets
Poor European November (services) PMIs due to containment measures were quickly judged irrelevant. They confirmed a double dip recession in the current quarter but market's focus is on a rosier 2021. AstraZeneca added to those hopes by being next in line to have developed a well-working vaccine. EMU equities...
NZD Surges on RBNZ Expectations, Dollar Rebound Short-Lived
Commodity currencies surge broadly today on the back of strong risk appetite, especially in Japan. New Zealand Dollar is additionally boosted after the government asked RBNZ to considering surging house prices in monetary policy moves. Dollar tried to rebound overnight, with the help from downside breakout in Gold. The...
NZ Robertson urged RBNZ to contribute to a stable housing market
New Zealand Finance Minister Grant Robertson urged RBNZ to include house price stability as part of its broad monetary remit. The triggered speculations that the central bank would refrain from launching another round of massive stimulus, including negative interest rates.
In a letter to RBNZ Governor Adrian Orr, Robertson said...
Kiwi, King Of Currencies: NZD/JPY, NZD/USD, GBP/NZD
Last week, the Reserve Bank of New Zealand (RBNZ) left rates unchanged, left their bond buying program unchanged, and introduced a new loan facility…all as expected. In addition, Central Bank Governor Orr signaled they were not considering negative interest rates. That news, combined with only a small cluster of...
Yen Extending Recovery as Treasury Yields Dip
Yen appears to be trying to reverse the losses posted earlier this week, as helped by pull back in treasury yields. US 10-year yield is trading at around 0.88 a the time of writing, well below this week's high at 0.975. German 10-year yield is also back pressing -0.55...
Yen Recovers Further as Stocks Pull Back Continues
Commodity currencies turn softer today, following pull back in stocks. On the other hand, Yen, Swiss Franc and Dollar are gaining some grounds. Euro and Sterling are mixed on the sideline. Over the week, Kiwi remains the strongest one, followed by Dollar and then Sterling. Swiss Franc and Yen...
RBNZ Orr: Be careful, be prepared and don’t run around on predictions
RBNZ Governor Adrian Orr said the improved growth and inflation projections in the latest Monetary Policy Statement released this week "is a very bod assumption". The central bank has been "at pains to explain to people that we are creating scenarios, not projections of certainty," he said.
"If the economy...
Sterling Reverses after GDP, Dollar Ignores Jobless Claims and CPI
Sterling suffers notable selling today after slightly weaker than expected Q3 GDP data. Though, pull back against Euro could be a bigger driver for the profit-taking. Elsewhere, better than expected US job data and worse than expected Eurozone production data were generally ignored. For now, Aussie is following the...
The US Dollar Grinds Higher
US dollar drifting ahead of inflation, employment reports
Holiday thinned trading saw the US dollar grind higher overnight, the dollar index rising 0.30% to 93.05. The steepening of the US yield curve, and an absence of other drivers have been supportive of the greenback this week. In the bigger picture,...
ECB Lagarde Taking Away The Lower Interest Rate Carrot Could Soften The Downside In The EUR/USD
Markets
EU and US stock markets extended their bullish run yesterday, with Nasdaq returning to its leading role (+2%). Traded volumes were muted though with a lot of US investors out for Veterans' Day. German Bunds finally found a bid near sell-off lows, but didn't really gain momentum. German yields...
Yen Paring Losses as Markets Turn to Consolidation, Oil Faces Resistance
The financial markets are staying in consolidative mode. Asian stocks are mixed in tight range, following the mixed closes in US overnight. Gold is trading sideway ahead of key near term support. In the currency markets, Yen and Swiss France are mildly higher, paring some of this week's losses....
RBNZ Hawkesby sees less stimulus required, NZD/JPY extends rally
RBNZ Assistant Governor Christian Hawkesby said today that there is no change in forward guidance that OCR will stay at 0.25% until March 2021. Though, "less stimulus is required than we thought in August", even though a "substantial amount" is still needed. Negative rates is a policy tool for...
Investors Full of Optimism
Investors full of optimism
A more muted session on Wednesday, which is likely to continue as the US and others observe Veterans Day and markets settle after a vaccine boost in recent days.
The vaccine news feels like a real game-changer for these markets. The first time in months that optimism...