BNZ Research

USD under pressure

The USD has been under considerable pressure for most of this year, peaking before the middle of January and falling between 7-9% depending on which index is used. Of the global majors, SEK, CHF and JPY have gained around 10% or more, EUR, GBP and NOK have gained 6-9% and the commodity currencies AUD, CAD and NZD have gained 2-6%.

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Tariff Turmoil

Since President Trump was elected in November, our central FX projections have been predicated on a moderate Trump II scenario playing out. This assumed a phasing in of higher tariffs but not to the full extent threatened pre-election. We had assumed increased tariffs on China but well short of the mooted 60%, and mostly 10% tariffs on imports from other countries (likely with various carve outs), which culminated in about a 10% increase in the average tariff rate applied to all US imports (from the prevailing average of 2.4%).

NZD/EUR: Cross slumps after EU wakes up

NZD/EUR has been in a downward trend since 2017 based on its 200-day moving average. On 11-March, the cross rate reached a five-year low of 0.5215 on an intraday basis. If we exclude the volatile period at the height of the COVID19 shock, the level reached was the lowest since 2011.

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NZD Corporate FX Update

Trump’s tariff policy overhangs the FX market over the next month or so, but we assess downside risk for the NZD to be fading.

President Trump’s policy agenda has been a key influence on currency markets, most notably for European currencies (see next page). The NZD and AUD have been range trading this year, after their big hit in Q4. Of note, there has been no further downside despite US tariffs on China increasing by 20%, with China’s government keen to encourage yuan stability and policy support to achieve 5% growth in 2025.

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NZD/AUD: Downside risks fading with time

• While NZD/AUD is trading below average and our short-term models suggest 0.85 is a fairer level, we see less downside risk to the cross rate compared to our view last year. If clear macro forces in favour of Australia relative to NZ haven’t triggered a much weaker cross rate, it is becoming increasingly difficult to see a trigger for a final lurch down.
• Our projections for the cross rate have remained around 0.89-0.90 over the past year and the risk assessment was clearly to the downside. Looking forward, we see those risks fading. Macro forces are beginning to move in favour of NZ relative to Australia.
• Rather than disregard the message of the models, we’re inclined to interpret them as a reason to believe there is a high hurdle for the cross rate to recover strongly.
• We think it is probably going to be difficult to crack above 0.93 this year and we see that as a potential resistance level. Meanwhile 0.89 is looking more like a support level than a central forecast as we progress through the year.

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NZD Corporate FX Update

President Trump’s tariff policy overhangs the NZD outlook in the first half of the year.

Early in President Trump’s second term we have seen him stretch legal boundaries to exude considerable executive power, threaten/impose/delay tariffs, and offer frequent daily soundbites to reporters, driving intraday volatility in FX markets.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Solid, But Cracks Appearing

A focal point for us in today’s April ANZ business survey was to see if the recent global trade angst has had any impact on NZ firm’s expectations for the way ahead. In short, the headlines looked good but there are clear worries in the details.

At face value, there didn’t look to be much change. The headline figures still look robust with business optimistic.

Job ads still subdued

New job ads remain subdued. They have been relatively stable over the last 10 months, albeit at a very weak level. Job ads increased 0.4% m/m in March but are still at levels last seen in 2013 (excluding Covid). Since 2013, the total labour force has grown by nearly 30%. This means far more people competing for an already scarce number of openings.

Inflation Accelerates

Given the mayhem occurring offshore and the uncertainty it puts around the economic outlook, local data continue to command less than usual market interest.

It was no surprise to us that inflation came in a touch above market and RBNZ expectations. And, equally, it was no surprise to us that there was very little market reaction to the news. There are simply much bigger issues circulating. But we shouldn’t ignore current inflation readings altogether. The starting point for inflation is worth noting.

A 0.9% quarter lift in Q1 CPI saw annual inflation lift to 2.5%, from 2.2% in Q4. This matched our expectations but was a tick higher than both the market and RBNZ picks.

Today’s figures confirm our view that annual inflation is creeping higher, and we think that will extend a bit further in the near term, before easing next year.

Further Price Pressure Revealed

Today’s Selected Price Indexes support our view that annual inflation will push higher in Q1, from Q4’s 2.2%. The focus of today’s Selected Price Indexes for March was to see if they collectively altered estimates for Thursday’s Q1 CPI. In short, they did, at the margin.

Continued softness

New Zealand’s services sector continued to show slight contraction during March, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for March was 49.1 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was up 0.1 points from February but still well below the average of 53.0 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that after a brief lift into minor expansion during January, the PSI now lies below the no change mark. For the sub-index results, Activity/Sales (47.4) fell a further 1.7 points, although New Orders/Business (50.8) recovered to record its highest value since February 2024. In addition, Employment (50.2) recorded its highest value since November 2023, ending 15 months of consecutive contraction.

The proportion of negative comments for March (56.7%) was down from February (57.8%) and January (61.9%). Businesses outlined reduced activity driven by economic uncertainty, high interest rates, inflation, and weak consumer and client confidence. Added pressures included global tariffs, rising costs and seasonal or weather-related downturns.

BNZ's Senior Economist Doug Steel said that "combing together the PSI and the Performance of Manufacturing Index (PMI), the Composite Index (PCI) suggests a modest economic recovery. The extent of growth implied by our indicator has been dampened by the softer PSI readings".

Holding its own

New Zealand’s manufacturing sector continued to show expansion for a third consecutive month, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for March was 53.2 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was down from 54.1 in February, although still above the average of 52.5 for the survey since the survey began.

BusinessNZ’s Director, Advocacy Catherine Beard said that the March result represented a full quarter of expansion for a sector that has experienced tough times over 2023 and 2024.

“The sub-index values were mostly in expansion during March. The key sub-index result for Production (54.2) was at its highest result since December 2021, although New Orders (49.6) returned to slight contraction. Employment (54.7) continued to lift with expansion levels at its highest since July 2021, while Finished Stocks (56.3) was at its highest since December 2021".

The proportion of negative comments from respondents stood at 57.5% in March, compared with 59.5% in February and 57.7% in January. Negative comments during March continued to see a number of manufacturers face a tough economic environment, with persistent weak demand, fewer new orders, and ongoing uncertainty across domestic and export markets.

BNZ’s Senior Economist Doug Steel said that “the PMI supports the notion that manufacturing GDP has increased in early 2025. The open question is what lies ahead given recent extreme volatility on global markets following rapidly evolving US-driven trade policy changes. Risks to the global and NZ growth outlook are downward”.

RBNZ more dovish

Who’d want to be a central banker making a decision today? The pessimist could easily conclude that the tariff war will have much greater negative implications for the global economy than currently understood and that central banks should ease very aggressively as soon as possible. Conversely, it could be argued that supply driven inflationary pressures counsel tighter monetary conditions irrespective of the growth implications. After all, the control of inflation, not growth, is the number one objective of the central banking community.

QSBO Suggests Almost Zero Inflation

At one level, whatever today’s Quarterly Survey of Business Opinion (QSBO) reported it was going to come with a caveat that it predates the recent financial market carnage set off by a major policy shift in the US. But it does outline the state of play before that. All responses came in by the end of March, ahead of President Trump’s ‘Liberation Day’.

Trump’s Terrifying Tariffs!

The actions of one President Donald Trump simply beggar belief. In a matter of days one man has almost single-handedly knocked the world economy off its pedestal. Disruptors are a necessary part of both economic and social evolution. They are invaluable at leading change when society is stuck in the status quo. But what we are witnessing right now is simply something else!

April MPR Preview

“If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025”. These were the final words of the policy assessment contained in the February Monetary Policy Statement (MPS). In our opinion, the expected evolution has been sufficiently met. The Reserve Bank should cut its cash rate 25 basis points to 3.5% at the April 9 Monetary Policy Review (MPR). And the parting words of the February MPS should be repeated leaving the door wide open to further 25 point cuts in May and July.

Job ads slip in February

Job ads declined 1.8% m/m in February, acting as a reality check after their 4.0% lift in January. Job ads are down 16.8% compared to a year ago. The labour market is still deteriorating, albeit the pace of decline is slowing. The Prime Minister recently noted the areas of the economy which he expects to support growth. We take a brief look at job ads in three of these sectors below.

Recovery begins

The NZ economy finished an abysmal 2024 with a lift in the final quarter. That was the main message from today’s Q4 GDP figures.

GDP grew 0.7% in the final quarter of last year. That was much stronger than expected. The market consensus was looking for 0.4%, we had 0.2%, and the RBNZ had 0.3%.

Confidence shattered, external accounts not so

Today’s economics note was meant to be all about the positive aspects of a rapidly reducing current account deficit. But any positive thoughts about our economy have been completely drowned by the release, this morning, of Westpac’s Consumer Confidence reading, which was simply awful.

Ups and downs

New Zealand’s services sector slipped back into contraction during February, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for February was 49.1 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was down 1.3 points from January and further away from the average of 53.0 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that unlike its sister survey in the manufacturing space that kicked on in terms of expansion during February, the PSI reverted back to what the services sector had experienced from March to December. For the sub-index results, Activity/Sales (49.2) fell 4.6 points after displaying the highest sub-index value for the previous month. New Orders/Business (49.4) slipped back to the same level of activity that was seen in December, although Employment (48.9) did display its highest value since August, albeit still in contraction.

Despite a return to contraction, the proportion of negative comments for February (57.8%) was down from January (61.9%), although still up from 57.5% in December and 53.6% in November. The overall tough economic climate remained the key observation from comments made.

BNZ's Senior Economist Doug Steel said that "while one might have hoped that the PSI would move higher again, we know that economic turning points can be messy. The brief foray above 50 in January remains the only month in the last year the PSI hasn’t been in contraction".

Fuel Prices Sticky

Weighting together the range of selected prices released this morning from Stats NZ shows their annual inflation pulled back to 1.6% in February, from 2.6% in January.

On the face of it, this looks encouraging for further easing in overall CPI annual inflation. However, we do not believe this to be the case. Prior to today’s data we thought annual CPI inflation would push higher over coming quarters including in Q1. Today’s data adds to the case.

Lift off

New Zealand’s manufacturing sector displayed its highest value for expansion since August 2022, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for February was 53.9 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up from 51.7 in January and the highest level of expansion since August 2022. The February result is also above the average of 52.5 for the survey since the survey began.

BusinessNZ’s Director, Advocacy Catherine Beard said that the February result was a welcome sight to see with the result building on the return to expansion in January.

“All sub-index values were again in expansion during February. The key sub-index results for both Production (52.4) and New Orders (51.5) were both the highest values recorded since August 2022. Employment (54.0) rose a further 3.2 points from January and at its highest value since September 2021. In addition, both Finished Stocks (54.1) and Deliveries (56.2) experienced notable improvements in expansion, with the latter displaying the strongest level of expansion of the sub-index values for February".

Despite the lift in expansion, the proportion of negative comments from respondents stood at 59.5% in February, compared with 57.7% in January. It was also up from 59% in December and 56% in November. Negative comments during February focused on an ongoing issue around a lack of orders for some manufacturers, as well as sluggish sales.

BNZ’s Senior Economist Doug Steel said that “the sustained improvement is a welcome change. It is one of several indicators that suggests the broader economy is turning for the better. Indeed, it indicates the pickup may be a bit faster than we are currently forecasting”.

Tracking the Tourism Recovery

Increasing international visitor numbers back to 2019 levels is an immediate Government focus in its endeavour to support economic growth. As tourism is NZ’s second largest export industry (after dairy), its progress is vital to New Zealand’s economic success. With this in mind, we take a step-back to assess just how the international tourism recovery is tracking at the moment.

Trans-Tasman Comparison

Last week, the RBNZ reduced the official cash rate by 50 basis points to 3.75% as widely expected. In the details, the accompanying statement noted lower net migration in NZ was “partly in response to subdued labour market conditions relative to Australia.” We take a brief look at employment in both countries below.

RBNZ Cuts Another 50

The Reserve Bank of New Zealand lopped another 50 basis points off its cash rate today, reducing it to 3.75%. And projected more easing ahead.
This was very much as we and the market expected. We went into this meeting with three broad expectations. First, the Bank would lower the OCR by 50 basis points. Second, it would significantly bring forward its projected low point in its forward rate track. And third, it would maintain that low point near 3%. It did all three.

Over the line

After 10 consecutive months of contraction, New Zealand’s services sector exhibited slight expansion during January, according to the BNZ –BusinessNZ Performance of Services Index (PSI).

The PSI for January was 50.4 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was up 2.3 points from December but still well below the average of 53.1 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that like its sister survey, the PSI has also waited an extended period of time to get back into expansion mode. For the sub-index results, Activity/Sales (54.0) led the way in January with its highest value since March 2023. Although New Orders/Business (50.0) showed no change for January, it was still its highest value since February 2024. In contrast, Employment (47.1) and Supplier Deliveries (47.8) remained in contraction during the month.

The proportion of negative comments for January stood at 61.9%, which was up from 57.5% in December and 53.6% in November. The economic downturn and uncertainty featured heavily amongst respondents.

BNZ's Senior Economist Doug Steel said that "the PSI is consistent with stabilisation rather than elevation, but its latest move upwards is encouraging”.

Food and Fuel Prices Higher in January

The balance of January’s selected price indices suggests a bit more upside to Q1 CPI calculations. The monthly prices are heavy on tradeable goods and that is what drove the generally firmer looking outcome.

Expansion

New Zealand’s manufacturing sector displayed expansion for the first time in 23 months, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for January was 51.4 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up from 46.2 in December and the highest level of expansion since September 2022. However, the January result is still below the average of 52.5 since the survey began.

BusinessNZ’s Director, Advocacy Catherine Beard said that after the longest continued period of contraction, the manufacturing sector has finally broken the trend and started 2025 on a positive note.

“All sub-index values were in expansion during January. The key sub-index results for both Production and New Orders both stood at 50.9, with the latter at its highest level of activity since August 2022. Employment (50.2) rose 2.5 points from December, while Finished Stocks (51.9) recorded its highest level of activity since May 2024.

The proportion of negative comments from respondents stood at 57.7% in January. This was down from 59% in December, but still up from 56% in November and 53.5% in October. Negative comments during January focused on the holiday break, as well as the ongoing effects of the soft economy. Positive comments displayed no strong pattern, with many focusing on specific business opportunities.

BNZ’s Senior Economist Doug Steel said that “it’s a positive start to 2025, with the manufacturing sector shifting out of reverse and into first gear. While the PMI still sits below its long-run average of 52.5, the improvement is welcome news for manufacturers after a very challenging two years”.

Unemployment continues its climb

New Zealand’s labour market continues to deteriorate. As anticipated by most, the unemployment rate rose to 5.1% in the December quarter from 4.8% a quarter earlier. This is now the highest unemployment reading since December 2016, if you exclude the COVID blip.

Markets yippy in April

• Trump’s reciprocal tariff policy and attack on Fed Chair Powell kicked off some significant market volatility and a “sell America” trade
• Some walk back on these reversed the market reaction, resulting in modest net moves for equities and the US 10-year rate in April
• However, broad USD weakness was largely sustained; NZD/USD traded a wide 5½ cents range and closed up 4½%

A muddling March on tariff threats

• Rising US tariffs, and threats of more to come, drove weaker risk appetite and global equity markets
• The USD was broadly weaker, with growth concerns outweighing its usual safe-haven characteristics; NZD/USD up 1½%
• EUR was a star performer, fuelled by looser fiscal rules; the NZD fell to multi-year lows vs EUR and GBP

NZD falls in February as Trump teases on tariffs

• February was peppered with various threats by Trump to raise import tariffs, with the only ones enacted being those for China
• Heightened policy uncertainty overhung the market, while weaker US data and lower US rates were a drag on the USD
• Still, the yuan weakened, and the NZD underperformed; NZD/USD fell 0.7% and the NZD was weaker on the major crosses

January jitters as Trump threatens tariffs

• Currency markets were jumpy in January, reacting to Trump’s soundbites on tariffs, but without any material reaction overall.
• NZD/USD recovered from a nearly 12% plunge in Q4 to show some signs of stability through January and a modest net gain.
• The NZD was up on most crosses; net moves in global rates were modest; global equity markets reached a fresh record high.

A quantitative model for NZGB ASW spreads

NZ asset swap spreads (ASW) have exhibited distinct price action since the pandemic, compared with prior years. While spreads have historically exhibited mean-reverting behaviour with NZGBs trading at a premium (lower yield) to the respective swap yield, the post-Covid period has seen increased volatility, driven by supply dynamics, central bank interventions, and evolving risk sentiment, leading to a period of persistent deviation from the previous mean.

Growth trumps inflation

• The odds of a global recession are rising amid the significant escalation in trade tensions. The backdrop is fluid but risks for rates are skewed to the downside even after the recent large moves lower.
• We had a lower bias for rates ahead of the escalation and the market’s terminal OCR pricing now aligns with our 2.75% forecast. The RBNZ is expected to reduce the OCR by 25bp at its Policy Review this week and signal further easing ahead. Without a de-escalation in trade tensions, we expect the market to price an even lower terminal rate.
• The NZ yield curve, which is already elevated in a global context, is expected to steepen further as the RBNZ easing cycle proceeds.
• We have a positive view on duration further out the curve and expect 10Y NZGBs to retest the cycle lows from last year. The final significant supply event is complete for the 2024/25 fiscal year. NZGB swap spread spreads are expected to maintain a higher trading range.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Rates Strategist: Pace of RBNZ easing to slow

• After three consecutive 50bp reductions in the OCR, the pace of RBNZ easing is expected to moderate going forward. We expect sequential 25bp cuts to 2.75% by the August MPS. Our forecast is below market pricing for the terminal cash rate, and we maintain a modest downside bias for front end rates. Governor Orr’s unexpected resignation doesn’t materially alter the outlook for monetary policy.
• Bank balance sheet pay side flow in the swap market is picking up as 2-year fixed mortgage rates reach a fresh low for the easing cycle. Even accounting for the large skew in the aggregate mortgage book towards short tenors, we are sanguine about the potential market impact. Monthly data going back over twenty years doesn’t suggest a significant relationship with 2Y swap spreads when there are large composition shifts towards longer fixed rate mortgages.
• NZ Debt Management will launch a tap syndication of the May-2032 nominal line before the end of April. The execution window aligns with technical NZGB demand associated with the April-2025 maturity alongside coupon flow. The swap spread widening trend paused after the announcement, with the market again focussed on upcoming supply, relatively soon after the May-2035 tap in February.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Central banks in disarray

Donald Trump has thrown global trade into chaos. He’s created volatility in financial markets. He’s raised fears of recession in the United States alongside the prospect of rising inflation. He’s created massive uncertainty across the planet. All of which has thrown the global central banking community into disarray.

Ongoing tariff fiasco remains centre stage

Trump’s tariff machinations will remain the focus for the week(s) ahead. It’s difficult to know where this is all going to end but, whatever the end point, growth will be flayed and uncertainty will remain elevated. Today’s retail, tourism and PSI indicators again highlight the fragility of a New Zealand economy that simply does not need the extra pressure coming from the United States. Meanwhile, keep an eye on Thursday’s CPI which should reveal an acceleration in domestic inflation.

It's All About Tariffs!

The actions of one President Donald Trump simply beggar belief. In a matter of days one man has almost single-handedly knocked the world economy off its pedestal. Disruptors are a necessary part of both economic and social evolution. They are invaluable at leading change when society is stuck in the status quo. But what we are witnessing right now is simply something else!

4% GDP Growth? Really?

Businesses remain firmly optimistic about the way ahead. Yes, business confidence edged a touch lower in March, but less than it usually does at this time of year and firms’ own activity expectations rose to 48.6. Judging by historical relationships, the latter is consistent with annual economic growth of over 4%. We forecast growth to pick up, but not to that degree. RBNZ is to review capital settings.

Trade Transmission

Commodity prices are higher, but the NZD hasn’t followed. This is altering the transmission of a rising terms of trade. Exports are significantly higher than a year ago, but consumer confidence is weak. We get another update on the latter this week, along with filled jobs for February as a partial guide to Q1 employment.

Chaos Reigns!

Two key macro aggregates are due for release this week: Q4 GDP (Thursday) and Q4 Balance of Payments (Wednesday). They are both critical to our understanding of how the economy has evolved. Well, that’s the theory. In practice, the data are ancient history, subject to significant revision (especially in the case of GDP) and pale into insignificance with regard to prospective monetary policy having been completely usurped by shifts in our high frequency indicators, the antics of the Trump regime in the United States and potential changes of style at the RBNZ.

Orr’s Abdication Hawkish?

In our opinion, the departure of Adrian Orr from the Governorship of the RBNZ may signal that New Zealand’s cash rate has less downside than would otherwise be the case. However, there are many moving parts. We won’t be changing our rate cut expectations solely on the back of the current ructions down at the Reserve Bank, but we warn strongly that the direction of risk to those forecasts is clearly upward. GDP partials are expected to confirm a weak Q4, PMI/PSI to give a timelier guide on activity, while pricing indicators are expected to suggest rising annual CPI inflation.

More Signs of Recovery

The economic recovery we forecast for 2025 continues to take shape. Last week’s data printed mostly for the better. But consumers remain pessimistic, and world worries remain. The terms of trade has charged higher and has further to go. It will support domestic activity. Today’s trade volumes look GDP positive. More Q4 GDP partial indicators are due this week and next.

Activity Rising; Uncertainty Heightened

The RBNZ met our and market expectations with last week’s 50 point cut and commentary. The Bank displayed comfort with looking through a near term forecast lift in inflation, as a negative output gap weighs on core inflation. However, activity indicators are improving and need to be watched closely. Today’s Q4 retail sales surprised on the high side, nudging up our estimate of Q4 GDP. Meanwhile, uncertainty measures are elevated and need to be respected.

All Eyes on the RBNZ

We expect the Bank to lower its cash rate by 50 basis points to 3.75%, at Wednesday’s meeting. Such a cut is the very widely held consensus view. And markets are pricing a 50-point cut as all but a done deal. It would be a massive surprise if the RBNZ did anything but deliver. The big interest for markets is what the Bank will intimate about its future rate track. Meanwhile, the PMI and PSI have finally shown some signs of life. Near term inflation looks a bit higher on tradeable prices, while non-tradeable inflation looks to be easing sharply.

February MPS Preview

Immediately following the November Monetary Policy Statement Governor Orr (MPS) suggested that if New Zealand’s economic evolution turned out broadly as expected the Bank would deliver a 50 basis point cut at the February MPS. While uncertainty has risen (largely thanks to the installation of one Donald Trump), domestic data has been revised (sometimes aggressively) and domestic government policy changes are flying thick and fast, it still seems to us that the broad trajectory of the economy is where the Bank expected it to be. Additionally, financial markets are pricing a 50 point cut as almost a done deal. On these bases, it would be massive surprise if the RBNZ did anything but deliver.

Labour Market Still Softening

As the world watches the opening salvos of a trade war, initiated by the US, there is an obvious risk that domestic proceedings play second fiddle. Nonetheless, there are some important releases to monitor. Q4 labour market data is expected to show a further softening in the labour market, including a lift in the unemployment rate.

BNZ Markets Today

US equities fell sharply after weak GDP data and lacklustre corporate earnings. At one point the index fell more than 2% before staging a partial rebound. There was a large amount of economic for investors to digest. Global bond yields are generally lower, and the dollar is mixed against G10 currencies, albeit with relatively small absolute moves. Brent crude prices fell towards US$63 per barrel.

BNZ Markets Today

The “Sell America” trade shows further sign of unwinding. US equities are up for a sixth consecutive day, with the S&P500 showing a current gain of 0.6%, supported by a backdown in auto tariffs. US economic data were awful, supporting a lower rates backdrop. Currency movements have been modest, but the USD is broadly stronger, and the NZD and AUD have underperformed over the past 24 hours.

BNZ Markets Today

The new week has begun with US equities reversing some of last week’s strong recovery, US Treasury yields falling modestly with a steepening bias and the USD on the back foot, with negative headlines on tariffs and the prospects for the US economy.

BNZ Markets Today

The recovery in investor risk appetite continued into the end of last week. The S&P gained 0.7% amid conflicting signals on trade negotiations. Chinese officials have denied any talks are taking place. However, a Bloomberg report suggested policymakers are considering suspending the 125% tariff on some US imports. Meanwhile, President Trump noted US levies on China will be maintained without ‘something substantial’ in return. He also said another delay to reciprocal tariffs was unlikely.

BNZ Markets Today

Markets have been whippy in response to headlines on tariffs but the net result is stronger global equity markets and small net movement in US Treasuries with a curve flattening bias. The USD is broadly stronger overnight. The NZD couldn’t sustain a brief move back over 0.60 and is trading back down around 0.5960.

BNZ Markets Today

There has been some reversal of yesterday’s price action, with US equities and the USD recovering and the Treasuries curve flattening. The NZD has slipped back below 0.60.

BNZ Markets Today

US assets have sold off after President Trump kicked off a renewed campaign attacking Fed Chair Powell before Easter and continuing that overnight. While price action was muted Thursday night, the market stepped up a gear from yesterday, after further digesting the implications of the Fed losing its independence. US equities have plunged, the US Treasuries curve is much steeper, and USD indices are probing fresh multi-year lows. The NZD broke above 0.60 yesterday and near the figure.

BNZ Markets Today

US equities are under pressure again, led by the IT sector, after the White House placed restrictions on Nvidia chip sales to China. US Treasury yields are lower for a third successive day. Net currency movements have been modest.

BNZ Markets Today

Markets have been relatively calm compared to recent weeks, with only a couple of negative trade war-related headlines to digest. US equities are flat, and the US 10-year Treasury yield has fallen for a second successive day, further reversing some of last week’s chunky rise. While the USD is broadly stronger overnight, the NZD has sustained much of the rally seen during local trading hours that saw it trade with a 0.59 handle for the first time this year.

BNZ Markets Today

Markets have begun the week on a calmer note but there have still been some noteworthy movements, including a strong rally in US Treasuries, reversing some of last week’s hefty move. Global equity markets are stronger and the NZD has outperformed, adding to last week’s strong recovery and making a fresh 2025 high just over 0.5890.

BNZ Markets Today

The US dollar fell to a three-year low and treasury yields moved higher amid continued elevated volatility across global financial markets. Equities recovered from an earlier drop in the Asian time zone, and the S&P closed 1.8% higher, after a week of extraordinarily large price swings. Boston Fed president Susan Collins said markets are continuing to function well, but the central bank would be willing to act and has the tools to address concerns about liquidity, should conditions become disorderly.

BNZ Markets Today

Global asset markets continue to see large swings. After posting one the largest ever one day gains, the S&P has fallen sharply and is currently ~3% lower, albeit off the session lows. Investors are concerned about escalating trade war between the US and China. China now faces an effective 145% tariff rate after the latest hike. Front end treasury yields dropped sharply, and the US dollar fell against G10 currencies. Oil prices fell close to 3% with Brent crude trading back towards US$63. Meanwhile gold prices reached a fresh record of US$3175 per troy ounce.

BNZ Markets Today

The extreme volatility has continued across global financial markets. Equity indices, which had already rebounded from earlier losses, surged higher after President Trump announced a 90 day pause on the implementation of tariffs on non-retaliating countries. This covers the excess reciprocal excess tariffs, the 10% baseline will remain, and is effective immediately. China is an exception, and tariffs have been increased to 125%.

BNZ Markets Today

Financial markets remain choppy with the ongoing focus on Trump’s tariff agenda, in particular the scope for any rollback and their economic impact. The US 10-year rate has pushed higher, US equities erased a strong gain to be flat with an hour left of trading and a return of the NZD to a 0.56 handle proved short-lived.

BNZ Markets Today

Financial markets have been wild overnight, with extreme volatility due to poor liquidity conditions and not helped by an active session by President Trump on his social media account, including the threat of an additional 50% tariffs against China. As we go to print, US cash equities show a modest gain, wiping out early losses. US Treasury yields are much higher, and the NZD has continued to languish in the 0.55s but importantly the key support level of 0.55 has held.

BNZ Markets Today

There was extreme volatility across global financial markets into the end of last week. The S&P closed the session more than 6% lower and there were huge moves in currency markets. The US dollar strengthened against G10 currencies and left its largest footprint in the NZD and AUD, which dropped 3% and 4% respectively against the US dollar from the local close. US Treasuries extended the recent rally with 10-yields trading below 4.0%.

BNZ Markets Today

Liberation Day has arrived and in a couple of hours (from 9am NZ time) we’ll find out where President Trump and his team have landed on applying reciprocal tariffs. US equities and Treasuries had a rollercoaster session overnight, with much weak risk sentiment showing a sharp reversal and both equities and rates are higher. The NZD has sustained the gain seen during NZ trading hours and sits comfortably above 0.57.

BNZ Markets Today

US equity futures have rebounded from a soft session in the Asian time zone yesterday as US tariffs loom over markets. The S&P is up around 0.5% in afternoon trade. Asset markets are likely to remain on edge in the leadup to ‘Liberation Day’. US treasury secretary Bessent said President Trump will announce reciprocal tariffs at 8am tomorrow (NZT). Treasury yields extended lower, and the US dollar was generally weaker against G10 currencies.

BNZ Markets Today

The new week has begun in the same fashion as last week ended, with weaker risk appetite as investors count down the days to Liberation Day, now just two sleeps away. Global equity markets are weaker, and commodity currencies have underperformed, seeing the NZD tumble below 0.57.

BNZ Markets Today

Weak risk sentiment contributed to a large fall in US equities and an outperformance of safe haven assets into the end of last week. Concerns about the widening trade war and US economic data, which pointed to slowing consumption and higher inflation, also weighed on sentiment. The S&P closed 2% lower while treasury yields dropped sharply across the curve. The yen outperformed within G10 currencies and gold prices have hit a new record high above US$3080 per troy ounce.

BNZ Markets Today

US equity markets are little changed in afternoon trade, after President Trump pressed ahead with tariffs on car manufacturers as part of a widening trade war, which weighed on share prices in the sector. The S&P oscillated around flat in the absence of first tier economic data. European indices closed lower with the Euro Stoxx falling 0.7%. Treasuries edged higher in yield while the US dollar is mixed against G10 currencies.

BNZ Markets Today

There was a soft risk tone overnight with US equities reversing some of the gains from earlier in the week. The S&P is close to 1% lower in early afternoon trade amid further tariff uncertainty. It was reported that President Trump will announce taxes on US car imports this morning, ahead of the broader imposition of tariffs, next week. Treasury yields moved modestly higher, and the US dollar was mixed against G10 currencies.

BNZ Markets Today

Market movements have been modest, with flat US equities, a small fall in US Treasury yields and small broadly-based gains for major currencies against the USD.

After the latest talks in Saudi Arabia between the US and Russia regarding the war in Ukraine, the US said Russia and Ukraine have agreed to a ceasefire in the Black Sea and to work out mechanisms for implementing their ban on strikes against energy infrastructure. The Kremlin confirmed the Black Sea ceasefire and said it was dependent on sanctions relief for banks and companies involved in agriculture exports. The agreement resulted in oil prices falling after some gains were made overnight, with the net result being Brent crude showing a modest fall for the day to just below USD73 a barrel.

BNZ Markets Today

The new week has begun with higher risk appetite, supporting a strong lift in US equities and pushing up US Treasury yields. However, there has been no positive spillover into the NZD, which shows a modest fall, while JPY has underperformed.

BNZ Markets Today

Friday saw an uneventful end to the trading week, with a lack of newsflow to drive market prices. Markets look to be in a holding pattern ahead of 2 April, which President Trump calls “Liberation Day”, the day when his reciprocal tariffs begin to take effect. Speaking at the White House, Trump said there will be flexibility on the forthcoming tariffs. “I don’t change, but the word flexibility is an important word”.

BNZ Markets Today

In the wake of the Fed’s policy update yesterday, US Treasuries are well supported, with the market comforted by Chair Powell seeing the impact on inflation of higher tariffs as “transitory”. We thought Powell might have avoided that word, given the Fed’s view of inflation being transitory during the COVID episode proved to be wrong, but the market seems to be buying into the narrative.

BNZ Markets Today

In the lead up to the US Federal Reserve’s rate decision this morning, US equities advanced while treasury yields and US dollar moved higher, in the absence of first tier economic data. Commodity markets were subdued with gold prices consolidating near record highs above US$3000 per troy ounce and brent crude was stable near US$71 per barrel.

BNZ Markets Today

After two positive days, US equities are back in the red, with the S&P500 down 1% in early afternoon trading, weighed down by the mega techs. US Treasury yields continue to consolidate. The 10-year rate has traded a 4.27-4.33% range and currently sits at the bottom end, down a touch from the NZ close.

BNZ Markets Today

Global equity markets are on a positive footing to start the week, following on from the strong recovery in US markets on Friday. The S&P500 is up 0.6% in early afternoon trading, with the IT sector a laggard. The Euro Stoxx 600 index rose 0.8%.

President Trump will speak with President Putin on Tuesday, with Trump saying “a lot of work” had been done over the weekend ahead of the planned conversation. Putin has so far pushed back against the US-brokered plan for an immediate ceasefire in the Ukraine-Russia war.

BNZ Markets Today

Investor risk appetite recovered into the end of last week. After the S&P had previously entered a correction, following the 10% fall from its February peak, the index rebounded strongly and closed the session 2% higher. The announcement of a deal by German politicians to proceed with a massive fiscal expansion supported European stocks. Chinese equities also advanced, led by consumer shares. Policy makers have outlined steps to boost consumption. US treasury yields moved higher while the US dollar was broadly weaker against G10 currencies.

BNZ Markets Today

More tariff threats, a possible US government shutdown and doubts over a Ukraine-Russia peace deal are all overhanging the market, resulting in weaker risk appetite – US equities are down significantly again, US Treasury yields are lower, and the yen has outperformed. The NZD is flirting with the 0.57 level.

BNZ Markets Today

Ongoing global trade tensions remain a focus for markets. The White House confirmed 25% tariffs on steel and aluminium would come into effect yesterday, without exemptions for any US trading partners. This prompted a response from the European Union which launched countermeasures on €26 billion of US imports. US equity markets are higher in afternoon trading though price action remains volatile. There was a muted response to softer than expected US CPI data.

BNZ Markets Today

President Trump’s tariff agenda continues to dominate market price action, with a ratchetting up on pressure against Canada driving further weakness in US equities and a weaker CAD.

BNZ Markets Today

Newsflow has been light to start the week but increased anxiety over President Trump’s policy agenda, particularly tariffs and slashing Federal government spending, continues to impact the market, with much lower equities and Treasury yields falling. Of note, President Trump wouldn’t rule out his policies causing a recession. On a Sunday Fox news interview he said “I hate to predict things like that. There is a period of transition, because what we’re doing is big”.

BNZ Markets Today

US equity markets rebounded from initial losses to close 0.5% higher with US labour market data closely matching expectations. US treasury yields moved higher as equities recovered while European bond markets ended little changed after the large selloff in previous sessions. The US dollar extended its decline against European currencies. Brent crude stabilised above US$71 per barrel and gold prices were stable, with data revealing China has expanded its reserves, for the fourth consecutive month in February.

BNZ Markets Today

News on tariffs continues to inject volatility into markets. Soon after we went to press yesterday the White House announced a one-month exemption for automakers that comply with the North American trade agreement known as USMCA, which drove stronger US equities into the close. In overnight news, Commerce Secretary Lutnick told CNBC that President Trump is likely to defer his 25% tariffs on Canada and Mexico for all goods and services covered by USMCA and President Trump confirmed this an hour later for Mexico, and we await any announcement for Canada. Trading in US equities has been choppy, and the market is falling rapidly as we go to print, with the S&P500 down around 2%.

BNZ Markets Today

There have been large moves across European markets after Germany revealed plans to reform its debt brake to allow for more defence and infrastructure spending. This contributed to a significant increase in European yields, a stronger euro and large gains for European equity indices. The Dax closed more than 3% higher. This provided a contrast with more subdued price action in US markets where the S&P is modestly higher.

BNZ Markets Today

Hey Grok, President Trump has just imposed new tariffs on Canada, Mexico and China. Give me a witty limerick to begin my daily report:
“A tariff from Trump, oh so bold,
On Canada, Mexico, and China bestowed,
With trade in a spin,
The markets begin,
To dance to a tune yet untold!”
Yesterday morning President Trump confirmed that 25% import tariffs on Canada and Mexico (with Canadian energy products enjoying a reduced 10% tariff) and an increased 10% tariff for China would indeed take effect from 4 March, as proposed. The news sent markets into a tailspin, with a weak close for US equities, lower Treasury yields, and the CAD and Mexican peso capturing the brunt of the FX reaction.

BNZ Markets Today

There is increased optimism in Europe after UK PM Starmer hosted European leaders at the weekend in a bid to support Ukraine. The UK and France said they would lead a European effort to forge a peace plan to present to President Trump. There was discussion of taking more responsibility for funding Europe’s defence. French President Macron proposed a one-month ceasefire “in the air, sea and on energy infrastructure”, but the word is that Europeans do not agree with this plan.

BNZ Markets Today

US equities staged a late-session rally on Friday to close 1.6% higher and edge back to positive returns for 2025. The market rebound was set against several macro cross currents including rising geopolitical tensions between the US and Ukraine, soft US consumption data and further developments on trade policy. Treasury Secretary Bessent said that Mexico had proposed matching US tariffs on China and urged Canada to do the same. US treasuries rallied and the US dollar closed higher.

BNZ Markets Today

Equity markets are weaker and the USD is broadly stronger after Trump will impose an additional 10% tariff rate on Chinese imports next week and, after all, the proposed tariffs on Canada and Mexico will also take effect. The NZD and AUD have underperformed, with spillover from a weaker yuan. The NZD is down 1% from this time yesterday to 0.5640.

BNZ Markets Today

Newsflow has been light but in breaking news Trump said Canada and Mexico tariffs – proposed at 25% – would go into effect 2 April. This is yet another pushback, from the original 1 February start date that was subsequently pushed out to 4 March. The timing of 2 April would coincide with the proposed start date for a whole host of other tariffs, subject to the various trade reports that will land on Trump’s desk due 1 April. Trump also said tariffs on products from the EU like autos and “other things” will be 25%. Other details will be forthcoming.

BNZ Markets Today

Risk sentiment has weakened further, evident in price action across most markets. US equities are weaker for a fourth day, US Treasury yields have fallen to fresh 2025 lows, with the 10-year rate down some 10bps. JPY has outperformed and commodity currencies have underperformed, although falls have been modest, with the NZD tracking down towards 0.57.

BNZ Markets Today

After the selloff into the end of last week, US equity futures recovered in Asian trade, but the earlier rebound wasn’t sustained after a soft regional manufacturing survey. The S&P is little changed in afternoon trading. Stocks in Europe also declined with the Euro Stoxx index closing 0.7% lower. US treasuries rallied and the US dollar made gains against G10 currencies. Brent crude prices edged higher towards US$75 per barrel.

BNZ Markets Today

US and European equity markets are weaker, retreating from recent record highs. The US S&P500 is down 0.7% in early afternoon trading, driven by financials and consumer discretionary stocks. Lower than expected revenue and earnings forecasts for the year ahead from consumer bellwether Walmart got the market’s attention as the company gave a cautious outlook. Management cited “stretched” consumer wallets and, ahead of tariffs, said “we are in an uncertain time”. Walmart’s stock price is down over 6% for the day. The Euro Stoxx 600 index fell 0.2%.

BNZ Markets Today

US equities fell sharply, and treasuries rallied amid rising investor risk aversion, after weaker than expected activity in the services sector raised concerns that political uncertainty is weighing on growth. The S&P closed 1.7% lower. The US dollar was generally stronger against G10 currencies despite the weaker data. Oil prices fell with Brent trading back towards US$74 per barrel, 3% lower on the day.

BNZ Markets Today

US equites are flat in afternoon trade in the absence of first-tier economic data or other catalysts to provide direction. US treasuries are little changed, and outperformed European fixed income markets, which moved higher in yield after hawkish comments from an ECB official. President Trump said he would likely impose tariffs on cars, semi-conductors and pharmaceutical imports of around 25%. An announcement is expected in early April. European stocks retraced from a record high with the Euro Stoxx index falling 1.3%.

BNZ Markets Today

Market movements have been modest, with global rates slightly higher and the USD modestly stronger. The NZD has been the weakest of the majors over the past 24 hours, in the lead-up to today’s RBNZ Monetary Policy Statement. US equities are relatively flat, while the Euro Stoxx 600 index rose 0.3% to yet another record high.

BNZ Markets Today

Markets are quiet and newsflow is limited, with US markets closed for the President Day’s holiday.

Following moves by the White House to negotiate with Russia to end the Ukraine war and VP Vance’s forthright speech to European leaders over the weekend that signals less US involvement in European defence, EU leaders are convening in an emergency meeting to discuss the Ukraine war and ways to boost European defence spending. The Euro Stoxx 600 index rose 0.5% to a fresh record high, with strong gains in defence stocks. S&P500 futures are flat.

BNZ Markets Today

A significant downside surprise to US retail sales data contributed to rally in treasuries and weighed on the US dollar. Equity markets were less impacted with the S&P oscillating in a narrow range and ultimately closing little changed as US investors looked ahead to a public holiday on Monday. European equities closed lower while the Hang Seng extended its recent strong run and advanced 3.7%. Brent crude prices were little changed near US$75 per barrel and gold prices were also stable after strong gains since the beginning of January.

BNZ Markets Today

Markets are trading in the afterglow of President Trump’s chat with the Russian and Ukrainian Presidents to begin negotiations to end the war between Russia and Ukraine. Other market moving events have been the US PPI report, which was stronger than expected but with weak components that feed into the more important PCE deflator, and Trump’s forthcoming announcement on reciprocal tariffs. Equity markets are stronger, global rates are lower, and most currencies are stronger against the USD, although the NZD and AUD have lagged the move.

BNZ Markets Today

Much stronger than expected US CPI inflation data were market-moving, driving higher US rates, a stronger USD and weaker US equities. Some of this reversed with the other market moving event being President Trump’s call with President Putin, with talk of negotiations to end the Russia/Ukraine war.

BNZ Markets Today

US equity markets gained in the absence of economic data or other catalysts as the investors look ahead to key US inflation data and Fed Chair Powell’s testimony to US lawmakers later the week. The S&P is 0.7% higher in afternoon trading and there were decent gains for European equity indices with the Euro Stoxx advancing 0.6%. Global bond yields are modestly lower, and the US dollar was broadly stable against the major FX pairings.

BNZ Markets Today

US equity and government bonds came under pressure after solid labour market data reduced expectations about the extent the Federal Reserve will be able to ease monetary policy this year. Weak consumer sentiment and concerns about inflation also weighed on investor risk appetite. The S&P fell to the session lows and ultimately closed 1% lower, after it was reported President Trump intended to issue reciprocal tariffs this week, in a further escalation of his trade war. The US dollar gained against G10 currencies.

BNZ Markets Today

US equities continue to push higher with modest gains while the US 10-year rate is down 7bps from the NZ close before the Waitangi Day holiday, albeit modestly higher for the current trading day. GBP has been the weakest of the majors, JPY has been the strongest, and the NZD has been range-bound between 0.5650-0.57.

BNZ Markets Today

Investor risk appetite has recovered since President Trump delayed the implementation of tariffs on Mexico and Canada by a month despite an escalation in trade tensions with China. The delay raised hopes that tariffs represent a negotiating tool of the new US administration rather than a final objective. The S&P is 0.7% higher, and more than 2% above the low, reached after the gap weaker on Monday morning. Treasury yields are modestly lower after US job openings fell while the US dollar is broadly weaker.

BNZ Markets Today

The new week began with the fallout from President Trump’s announcement Friday on tariffs on the three largest trading partners of the US, under the auspices of a national emergency regarding illegal immigration and drugs entering the US. As markets opened, the USD soared and equity futures plunged, while the US Treasuries curve flattened. These moves have shown some reversal overnight after Trump agreed to delay the tariffs on Mexico by a month.

BNZ Markets Today

Financial markets were volatile into the global close amid conflicting news on timing for the implementation of tariffs on US imports. Confirmation that tariffs would be set for Canada and Mexico at 25%, China at 10%, and begin this week, saw equities retrace earlier gains. The S&P closed 0.5% lower. G10 currencies also saw large swings. US treasuries were marginally higher in yield, while European bonds rallied, after softer than expected regional inflation data.

Outlook for Borrowers: Post April MPR

The Reserve Bank of New Zealand (RBNZ) reduced the Official Cash Rate (OCR) by 25bp to 3.50% at the Monetary Policy Review (MPR) on Wednesday. This was unanimously anticipated by economists. The Bank had previously provided guidance for the 25bp move during the February Monetary Policy Statement (MPS). The overnight index swap (OIS) market implied a chance of a larger 50bp cut, given the recent increase in global trade barriers.

Outlook for Borrowers: Post February MPS

The Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) by 50bp to 3.75% at the Monetary Policy Statement (MPS) on Wednesday. All 23 economists surveyed by Bloomberg forecast the reduction. The Bank had previously signalled the move in November, conditional on the economy evolving in line with its expectations. Pricing in the overnight index swap (OIS) market implied a near-certain chance of a 50bp cut.

Tariffs and Trade

The primary sector has been a standout performer over the past year. Significant improvement in key primary product prices and good volumes have combined to drive export receipts materially higher. This has put many in a better position than a year ago. And it is very helpful to face into whatever the world has in store ahead.

Upswing Welcome

There has been a decent upswing in global prices for some of NZ’s major primary export products over the past year. For example, wholemilk powder prices are up 18%, the price of a leg of lamb is up 41%, and the US imported bull beef price is up 24%.