Currency Research
NZD Corporate FX Update
The NZD’s expected recovery is running ahead of schedule, and we lift our year-end target to 0.65
Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.
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%.
Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.
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%).
Economy Watch
Growth Confirmed, Eyes Ahead
At one level, whatever today’s GDP data reported for the first quarter of the year it was always going to come with a caveat that it predates a lot of material change.
Recent developments include the global trade upheaval that US President Trump’s ‘Liberation Day’ kicked off and the associated rapid elevation of uncertainty; escalating geopolitical tension; and a material softening in timely domestic economic indicators for Q2.
Current Account Rapidly Improving
The external accounts continue to improve, with the current account deficit narrowing to 5.7% of GDP in the year to March 2025. This is well below its peak of 9.2% in December 2022, largely due to high commodity prices, strong primary production and the recovery in international tourism. We expect the deficit to continue narrowing towards 4% over the next year.
Annual CPI inflation to clear 3.0%?
May month selected price indices are unequivocally hawkish. On balance the monthly data has turned out to be more inflationary than we had expected. This has caused us to revise upwards our Q2 CPI pick to 0.8%, from 0.6% previously. Importantly, this is well above the RBNZ’s 0.5% estimate for the quarter.
Service with a slump
New Zealand’s services sector continued to show further decline in activity during May, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI for May was 44.0 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was down 4.1 points from April and well below the average of 53.0 over the history of the survey.
BusinessNZ's CEO, Katherine Rich said that after a return to small expansion in January, the sector has continually contracted month-on-month since then, reaching its lowest level of activity since June 2024. For the sub-index results, the key results for Activity/Sales (40.1) and New Orders/Business (43.2) were also the lowest since June 2024. Employment (47.2) fell back into further contraction, while Deliveries (45.7) remained unchanged from the previous month.
The proportion of negative comments for May (65.6%) was up from April (61.8%) and March (56.7%). Many businesses noted reduced demand and falling revenues due to rising costs, economic uncertainty and low consumer confidence. Comments noted customers spending less, delaying decisions, and responding cautiously to inflation, interest rates, and broader market instability.
BNZ's Senior Economist Doug Steel said that "the fall in the PSI follows the sharp decline in the Performance of Manufacturing Index (PMI) from 53.3 to 47.5. Together, they are consistent with the economy returning to recession. We’re a long way from forecasting this, but the data are a reminder of just how vulnerable the economy currently is".
Back in the red
New Zealand’s manufacturing sector fell back into contraction during May, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for May was 47.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was down from 53.3 in April and a return to contraction after four consecutive months of expansion. The survey was also well below the average of 52.5 since it began.
BusinessNZ’s Director, Advocacy Catherine Beard said that the May result was disappointing to see given the sector had appeared to have turned a
corner at the start of 2025 following a tough 2023-2024 period of contraction.
“Four of the five main sub-index values were in decline, with New Orders (45.3) showing the strongest level of contraction for May. Following healthy expansion from February-April, Employment (45.7) decreased 8.9 points to be at its lowest level of activity since July 2024".
The return to contraction also saw the proportion of negative comments from respondents increase to 64.5%, compared with 58% in April and 57.5% in March. Comments indicate that manufacturers are reporting a clear return to decline, driven by falling demand, weak orders, and low business confidence. Rising costs, economic uncertainty, and reduced consumer spending are compounding pressures, while forward orders and investment remain stalled.
BNZ’s Senior Economist Doug Steel said that “the New Zealand economy can claw its way forward over the course of 2025, but the PMI is yet another indicator that suggests an increased risk that the bounce in GDP reported for Q4, 2024 and Q1, 2025 could come to a grinding halt”.
Retail outlook on a knife edge
When economic cycles turn they invariably develop a self-fulfilling momentum that generates shifts in activity much greater than inherently conservative forecasters might contemplate. Until Master Trump arrived on the scene, we were developing growing confidence that we were at the start of a sustainable economic recovery. Now we are less certain.
ANZ Survey Surprisingly Robust?
With high frequency data front of mind for the Reserve Bank, today’s ANZ business opinion survey was front of mind for us.
At first glance the figures rolling across the screens looked simply awful. Business confidence down, activity outlook down, exports down, investment intentions down, residential construction down, commercial construction pummelled, employment down, profits pummelled.
RBNZ: Delivers A Hawkish Cut
In its April Monetary Policy Review, the Reserve Bank Monetary Policy Committee said “As the extent and effect of tariff policies become clearer, the Committee has scope to lower the OCR further as appropriate. Future policy decisions will be determined by the outlook for inflationary pressure over the medium term”. The Bank didn’t repeat these words in its May policy assessment but it remains the centrepiece of its thinking.
Retail Recovery From Weak Base
Retail sales volumes increased 0.8% in the March 2025 quarter. This was well above both our forecasts and market expectations for 0.0%. Combined with +1.0% in the previous quarter, it suggests retail sales volumes are growing at an annualised pace of 3.6%.
Signs of Stabilisation
New jobs ads increased 1.1% m/m in April. This is the second consecutive month they’ve lifted, which last occurred back in August 2022. While it is still too early to assume we’re at the beginning of an upturn, there are clear signs labour demand is at least stabilising. Nonetheless, any improvement would be coming off a very weak base with job ads still 9.6% below year earlier levels, and 48% below their mid-2022 peak.
NZ Budget 2025
Key forecasts
The Government expects a balanced budget in the year ended June 2029.
Deficit is projected to rise to 2.6% of GDP in fiscal 2026 from 2.3% this year.
Net core crown debt progressively edges higher from a current 42.7% of GDP to a peak of 46.0% of GDP in the June year 2028.
The fiscal forecasts are based on Treasury’s expectation that following a 0.8% contraction in GDP in the June year 2025 growth will bounce to average 2.9% per annum over the next four years.
Declining fortunes
New Zealand’s services sector showed further decline in activity during April, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI for April was 48.5 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was down 0.4 points from March and well below the average of 53.0 over the history of the survey.
BusinessNZ's CEO, Katherine Rich said the sector has fallen back into a pattern of mild contraction. For the sub-index results, Activity/Sales (47.3) remained the same as March, although New Orders/Business (50.9) continued to buck the trend with its highest value since February 2024. Employment (48.2) fell back into contraction, while Deliveries (45.8) recorded its lowest level of activity since September 2024.
The proportion of negative comments for April (61.8%) was up from March (56.7%) and February (57.8%). Businesses noted being negatively impacted by a combination of weak consumer demand, high cost of living and interest rates, economic and geopolitical uncertainty, seasonal slowdowns and low business confidence.
BNZ's Senior Economist Doug Steel said that "for all the commentary around the economic recovery, the PSI is a good reminder that current conditions are extremely challenging. New Zealand’s PSI remains weaker than all our key trading partners. At 48.5, it’s consistent with a service sector still moving backwards".
Uptick in expansion
New Zealand’s manufacturing sector showed an uptick in expansion during April, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for April 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 53.2 in March and the fourth month in a row showing expansion. The survey was also above the average of 52.5 since it began.
BusinessNZ’s Director, Advocacy Catherine Beard said that the April result continued a consistent run of expansion for the sector during last three months.
“All of the sub-index values were in expansion during April. The key sub-index results for Production (53.8) and New Orders (51.4) were both in positive territory, while Employment (55.0) displayed its highest level of expansion since July 2021".
Despite the improvement in expansion during April, the proportion of negative comments from respondents increased slightly to 58% in April, compared with 57.5% in March, but still down from 59.5% in February. Negative comments during April saw some manufacturers facing a slowdown driven by high costs, global and local economic uncertainty. In terms of positive comments, other manufacturers reported modest growth, driven by rising demand, infrastructure projects, and strong niche markets, despite lingering caution from inflation and supply challenges.
BNZ’s Senior Economist Doug Steel said that “activity is not surging, but a manufacturing recovery seems to be underway with the PMI having improved substantially from its low of 41.4 last June. That said, there remain questions around how sustainable it is given uncertainty stemming from offshore”.
Prices Volatile But Upward Undercurrent
oday’s April Selected Price Indexes displayed a heap of volatility, as is often the case in these monthly indicators. Some caution is warranted before jumping to conclusions on what they collectively mean for Q2 CPI.
Budget 2025 Preview
At the Half-Year Economic and Fiscal Update, a small fiscal surplus was projected in the year to June 2029. Indications from Finance Minister Willis are that Budget 2025 will keep to this target. But the path back to surplus is likely to remain extremely challenging. It is being threatened by downgrades to economic growth forecasts and subsequently the Government’s ability to raise revenue.
Labour Market Loose
Today’s Q1 labour market statistics were always going to feel like old news from a market’s perspective, given the big changes to the global trade and growth outlook through April. But they do set the starting point for the labour market. It is loose and wage inflation is easing.
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.
Financial Markets Wrap
Currencies consolidate in May
• The de-escalation of the US-China trade war resulted in much calmer market conditions in May, compared to April’s turmoil
• Net major currency movements were modest, even if the USD was broadly weaker again. NZD/USD rose ½%
• Higher risk appetite and more focus on US fiscal policy saw upside pressure on global rates
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
Interest Rate Strategy
Post Budget NZGB supply update
Bond programme revised modestly higher
New Zealand Debt Management (NZDM) updated the bond programme today alongside the Budget Economic and Fiscal Update (BEFU). Forecast gross New Zealand Government Bond (NZGB) issuance has been increased by a total of NZ$4 billion over the forecast period to June 2029, compared with the Half Year Economic and Fiscal Update (HYEFU) in December. Gross issuance has been revised higher, at each borrowing programme update since December 2021, reflecting ongoing fiscal pressures.
Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe
Rates Strategist: Lower rates amid subdued rebound
• Headwinds from the global growth downshift, combined with subdued domestic high frequency activity indicators, skew the risks for front end NZ rates lower. The RBNZ is expected to cut rates by 25bp at the May 28 Monetary Policy Statement, signal room for further easing, and shift its modelled OCR path lower.
• Curve steepening is likely to resume now the April overshoot has corrected.
• The compensation for taking duration risk is improving. 10Y NZGBs offer the highest FX hedged yield within developed markets. Although the backdrop for duration appears favourable, we have a higher conviction for shorter maturities.
• NZ swap spreads are expected to consolidate ahead of the borrowing programme update alongside the Budget on 22 May. A pre-Budget speech by Finance Minister Willis implied continued fiscal pressures amid downward revisions to growth forecasts by the Treasury.
Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe
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.
Markets Outlook
Economy Hits Q2 Brick Wall
Timely indicators like the PMI and PSI suggest the economy hit a brick wall during Q2. This does not deny what looks like a firm expansion in Q1, expected to be confirmed in this week’s data. May’s selected prices are expected to support our view that annual inflation pushed higher in Q2. A significant escalation in Middle East tensions has seen oil prices spike, adding yet more uncertainty to the global economic outlook. NZ’s large current account deficit is seen narrowing in Q1.
Q1 GDP Preview
We expect next Thursday’s Q1 GDP data to confirm further economic recovery. The output gap still appears wide and there is much uncertainty around the path ahead, but recovery looks as though it continued in the first quarter of the year.
Trade Mixed For Q1 Growth
Issues surrounding tariffs continue to keep global economic uncertainty elevated. It keeps coming. Today’s Q1 goods trade data looked highly supportive of Q1 growth, while services trade looked the polar opposite. We await more Q1 GDP partials over the coming week. The trade data confirmed rising tradeable inflation which we think is peaking.
RBNZ to cut this week
We expect the RBNZ to cut the OCR by 25 basis points on Wednesday and signal further reductions ahead. Whatever the Bank does, it needs to highlight the massive uncertainty that is pervasive, and the fact that such uncertainty means very little about the future can be taken for granted including future interest rate settings. Business expansion plans may be curtailed by uncertainties offshore. New season milk price forecasts are due and likely to be solid.
RBNZ to continue easing
Donald Trump’s policy machinations are making it a horrible time to be a central banker. But decisions still have to be made, and we think the negative growth impact of the US administration’s policy gyrations add to the need for the RBNZ to continue its easing cycle. Meanwhile, the 2025 Budget takes centre-stage. We expect multiple new spending announcements but the majority of which will be funded from savings made elsewhere.
Activity indicators feature
Sadly, the only game in town is Mr Trump and his tariff antics. However, while we remain at the mercy of offshore developments there are still domestic indicators that need to be watched closely for first indications as to how international developments might start to impact local activity. The key data we will be watching over the next week will be the BNZ-Business NZ Performance of Manufacturing Index, released Thursday, and the Performance of Services Index Monday May 19.
Still No Clarity
Financial markets’ extreme angst might have passed for the time being, with risk assets recently bouncing off their lows, but the economic impact of the US-driven global trade shock is only just beginning to show up in indicators.
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.
Markets Today
BNZ Markets Today
In the lead up to the US Federal Reserve’s rate decision this morning, US equities traded modestly higher and treasury yields were lower across the curve. Currency markets were generally stable, although the Swedish krone fell sharply, after the Riksbank cut rates to 2.0% and signalled more easing is possible. Brent Crude prices are little changed around US$76 per barrel, having recovered from an earlier dip, after President Trump said Iran had reached out and wants to negotiate.
BNZ Markets Today
Risk sentiment is weaker as the US has become more involved in the Israel-Iran conflict. Global equities are weaker, US Treasury yields are slightly lower, and the USD is broadly stronger, with the NZD falling towards 0.60.
BNZ Markets Today
The new week began with market focus on the Middle East, amidst the fourth day of missiles firing between Israel and Iran. With Israel’s aerial attack dominating, the conflict not spreading to include other countries, and oil infrastructure not targeted, the market has already adopted a sanguine view and risk assets have recovered.
BNZ Markets Today
There was a risk-off tone across financial markets which began on Friday afternoon after Israel launched unilateral strikes against Iran’s nuclear programme. The subsequent retaliation by Iran further escalated the conflict. The S&P declined 1%, after recovering off the session low, on hopes of a de-escalation via diplomatic channels. However, the US-Iran meeting in the weekend was cancelled, and with no sign of a let-up in hostilities, risk sensitive assets face a challenging start to the trading week. Gold prices advanced above US$3430 pre ounce.
BNZ Markets Today
Softer than expected US CPI data drove down US rates and the USD, although European currencies have been the main beneficiary. The NZD and AUD are little changed overnight after a disappointing end to US-China trade talks, with no progress other than agreeing to what was previously agreed, although full details have yet to be officially released.
BNZ Markets Today
It has been another uneventful trading session with light newsflow. US equities are slightly higher, US treasury yields have range traded and currency movements have been small, with the NZD tracking just under 0.6050.
US and China trade talks entered their second day and were ongoing into the London evening as we go to print. A Treasury official said the session could stretch into the night as the parties work out technical details, resuming talks at 7am NZ time after a break for dinner.
BNZ Markets Today
Newsflow has been light to start the week, and we await news from London around US-China trade talks. US equities are up modestly, and US treasury yields are down modestly. The USD has started the weak on a soft note with a broadly-based fall, helping the NZD push up through 0.6050.
BNZ Markets Today
US equity markets made solid gains into the end of last week supported by labour market data and further signs of easing US-China trade tensions. The S&P closed 1% higher and reached the psychological 6,000 level for the first time since February, as steady employment growth helped ease concerns about an imminent slowdown. In Europe, the Euro Stoxx index made modest gains. Treasury yields closed higher, and the US dollar gained against G10 currencies. Brent crude traded above US$66 per barrel and is back at the top end of the one-month range.
BNZ Markets Today
There have been a number of market-moving events overnight, including a call by President Trump and President Xi, an ECB policy update, interpreted as a hawkish cut by the market, and higher than expected US initial jobless claims. The net result is little change in US equities and higher global rates. The USD reversed an earlier loss. The NZD traded at a fresh 2025 high of 0.6080 before falling back to 0.6040.
BNZ Markets Today
US treasury yields declined amid soft US economic data. Equity markets were less impacted, and the S&P is marginally higher in afternoon trade. Global equities reached a fresh all time high, as measured by the MSCI All-Country World Index, above the previous peak in February. The index has been underpinned by large gains by European stocks with the Euro Stoxx up 10% in 2025. The US dollar declined against G10 currencies.
BNZ Markets Today
US equities are stronger, supported by the JOLTs report, which showed resilience in the labour market. US treasuries reversed course after the report, pushing up yields across the curve, and the 10-year rate is up slightly from the NZ close at 4.46%. The USD is broadly stronger over the past 24 hours, with the NZD hovering around 0.60 overnight after trading at a fresh 2025 high yesterday afternoon.
BNZ Markets Today
After registering solid gains of more than 6% during May, the S&P is little changed to begin the new month. US steel and aluminium shares gained after President Trump said he would double tariffs on imports. Trade tensions remain in focus after China and the US accused each other of violating their trade deal from last month and the European Union warned it may speed up retaliatory measures. Treasury yields rose, despite a weaker than expected manufacturing ISM report, and the US dollar is weaker against G10 currencies.
BNZ Markets Today
Risk sentiment received a boost after a US trade court invalidated President Trump’s ‘liberation day’ tariffs, deeming them illegal. S&P index futures gained more than 1%, and the US dollar advanced against G10 currencies, after the ruling was announced in the Asian time zone. However, the S&P retraced from the highs and the dollar reversed course overnight. US treasuries extended the recent move lower in yield supported by a solid 7-year auction.
BNZ Markets Today
Newsflow has been light overnight. US equities are consolidating, with focus on Nvidia’s earnings results after the close later this morning. Global rates are higher for the day, with spillover from a poor ultra-long bond auction in Japan, but the US 10-year rate hasn’t pushed much higher overnight. The NZD has sustained the modest gain seen following the RBNZ’s new neutral bias, following its 25bps rate cut yesterday.
BNZ Markets Today
Following the long US weekend, US equities have jumped higher, and US Treasuries have rallied, in response to the de-escalation of trade tensions between the US and EU. Falls in global rates have been aided by speculation that Japan will address the turmoil in its ultra-long bonds. The USD is broadly stronger, recuperating some of last week’s loss, seeing the NZD probe just below the 0.5950 level.
BNZ Markets Today
Markets have been quiet and newsflow overnight has been light, with the US and UK on holiday. Some trade war de-escalation between US and the EU has supported equity markets. The NZD and AUD have pulled back from fresh year-to-date highs seen during the NZ trading session. The NZD is back down to 0.60.
BNZ Markets Today
Equities tumbled after President Trump threatened to impose aggressive tariffs on the European Union. The S&P dropped more than 1.5% before recovering to end the session 0.7% weaker. The rebound in US equities was supported by US Treasury Secretary Bessent saying the US could strike several large trade deals in coming weeks. Treasuries retraced an earlier rally while the US dollar remained under pressure. Gold prices traded above US$3360 per troy ounce, a gain of 2%.
BNZ Markets Today
US equities have traded higher, as treasury yields retraced from the recent highs, and economic data suggested the economy remained resilient in the face of tariff uncertainty. The US House of Representatives passed Donald Trump’s tax bill which would cut taxes, reduce social spending and increase federal debt. The Euro Stoxx index closed 0.5% lower. Oil prices are little changed. Brent crude is trading near US$64 per barrel despite reports OPEC+ is considering further output hikes.
BNZ Markets Today
Concerns about rising US debt and budget deficits has contributed to further rise in US treasury yields. 30-year bonds are trading back above 5.0%. Rising yields have weighed on the S&P which is down close to 1%. Currency markets were subdued overall. The jump in oil prices in Asian trade, linked to a CNN reported that US intelligence had suggested Israel is preparing to strike Iranian nuclear facilities, has fully retraced. Brent crude is trading around US$65 per barrel.
BNZ Markets Today
Global equity markets are generally higher with decent gains across European and Asian indices. However, US equities are little changed, and consolidating near the recent highs, after a strong rally over the past month. Government bond curves have continued to steepen, particularly at the longer end of the yield curve, with a large selloff in Japan after a weak bond auction. The US dollar is generally softer against G10 currencies, though the AUD underperformed after the central bank meeting.
BNZ Markets Today
Risk sentiment began the week with a soft tone, after the downgrade to the US government’s credit rating by Moody’s Ratings, near the global close on Friday. S&P equity index futures fell more than 1% in Asian trade, treasury yields moved higher with the curve steepening and the US dollar fell. Risk sentiment has rebounded overnight with the S&P fully unwinding its earlier fall and treasuries also recovering.
BNZ Markets Today
Late in Friday’s trading session, Moody’s downgraded the US credit rating from Aaa to Aa1, resulting in a weak close for US Treasuries, which immediately jumped 5bps. The S&P500 had already closed up 0.7% before the announcement but US index ETFs trading after the close fell about 1%. The USD barely fell after making overnight gains after the NZ close. The NZD closed the week around 0.5580.
BNZ Markets Today
Bond and equity investors celebrated weaker US data, taking US rates lower and US equities higher. The currency market shows a risk-off tendency, with safe havens CHF and JPY outperforming against further weakness in the NZD and AUD.
BNZ Markets Today
Markets are in a consolidation mode, against the backdrop of light newsflow. President Trump has been busy in the Middle East posting videos on social media of himself travelling in the region.
BNZ Markets Today
In the aftermath of the Trump’s tariff U-turn that significantly de-escalated the US-China trade war, US equities have made further gains and US Treasuries have looked through the softer-than-expected US CPI report, with yields pushing higher. The USD has reversed course after yesterday’s sharp recovery, helping the NZD recover to 0.5940.
BNZ Markets Today
The new week has begun with some significant moves in market prices, following de-escalation of the US-China trade war, with both parties agreeing to temporarily reduce tariffs to more palatable levels ahead of further talks. Equity markets have soared, led by the US, global rates are much higher, and the USD has recovered strongly across the board. This sees the NZD probing 0.5850.
BNZ Markets Today
US asset markets were largely in a holding pattern into the weekly close ahead of the first official trade talks between the US and China in Switzerland. US equities and treasury yields ended the session little changed with limited first tier economic data to provide the market with direction. European equities advanced. The Dax index in Germany has fully retraced its April drawdown and closed above its previous March peak.
BNZ Markets Today
Risk sentiment is higher on trade war de-escalation with a US and UK trade “framework” and President Trump providing positive signals on this weekend’s US-China trade talks and telling everyone to buy stocks. US equities are up over 1% and Treasury yields are up 10-13bps. Hopes for trade deals have supported the USD across the board and the NZD has fallen to 0.59. GBP has fallen less after the BoE delivered a hawkish cut.
BNZ Markets Today
Further signs of a de-escalation in the US China trade war provided support to risk sensitive assets ahead of the Federal Reserve’s interest rate decision. There was confirmation of trade talks between the US and China. US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet with Chinese officials this weekend in Switzerland. In addition, Chinese officials outlined a range of measures aimed at supporting the economy.
BNZ Markets Today
US equities are lower, US Treasury yields are lower, and the USD is broadly weaker, with the market remaining fixated on tariffs and the impact for the US economy. The NZD is trading with a 0.60 handle this morning.
BNZ Markets Today
Taiwan was in the spotlight during the Asian trading session after another surge in its currency, not helped by speculation around US trade deals. There was spillover into other currencies and the NZD is down a touch overnight after a failed attempt to break back above 0.60. A stronger than expected ISM services index helped US equities recover early losses and pushed up US Treasury yields. The UK and some Asian markets were closed for holidays.
BNZ Markets Today
Global equity markets made solid gains into the end of last week supported by signs of a potential de-escalation in the trade war between the US and China along with resilient US labour market data. China’s Ministry of Commerce said it is assessing the possibility of trade talks with the US and that US officials have repeatedly expressed a desire to negotiate with China on tariffs. Bloomberg reported that China has started to exempt some US imports from tariffs, representing around US$40 billion, aimed at reducing the impact on its economy.
BNZ Markets Today
US equities are higher following strong earnings reports from Microsoft and Meta and the ISM manufacturing index didn’t fall as much as expected, even if there are clear signs of cracks opening in the US economy. Sentiment has also been supported by chatter that the US is trying to initiate trade talks with China. These factors supported a lift in US Treasury yields and a broadly stronger USD. The NZD slipped below 0.59 earlier this morning. Many European and Asian markets have been closed for May Day holidays.
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”.
Outlook for borrowers
Outlook for Borrowers: Post May MPS
The Reserve Bank of New Zealand (RBNZ) reduced the Official Cash Rate (OCR) by 25bp to 3.25% at the Monetary Policy Statement (MPS) on Wednesday. The rate cut was expected by economists and fully discounted by overnight index swap (OIS) market pricing. The decision was reached by a 5-1 majority. The dissenting Committee member preferred to leave the OCR unchanged at 3.50%. There was no discussion of a 50bp cut.
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.
Rural Research
Records and Inflation
Higher prices for some of NZ’s major primary export products have been a feature of the past 12 months. Lamb, beef, and dairy product prices standout with prices over the past month up in the order of 40%, 30%, and 20% respectively over the same period a year ago.
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.