BNZ Research

Our research team offers expert commentary on economics, foreign exchange, fixed interest and credit, to help inform your organisation’s risk analysis and decision making. 

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Publications available

Currency Research

NZD Corporate FX Update

Jason Wong -

The NZD is currently fairly priced at 0.68 and we still see the NZD anchored about 0.67-0.70 this year, with brief excursions outside that range. Downside risks include weaker than expected global growth, led by China and Europe. An assumed thawing of US-China trade tensions and strong NZ terms of trade are supporting factors.

NZD/GBP Chartpack

Jason Wong -

This is the third chart-pack in our series looking at NZD cross rates. NZD/AUD and NZD/CAD chartpacks were published 29 January.

NZD/CAD Chartpack

Jason Wong -

NZD/CAD Summary:

• The cross is currently near the middle of its 5-year trading range.
• On a multi-year view, we see more downside than upside pressure.
• We don’t have strong conviction on the near-term outlook, with oil prices likely to be a key swing factor. Relative commodity prices are a much more important driver than interest rate differentials.
• Our forecasts show the cross spending more time in a 0.85-0.90 range than 0.90-0.95 range this year.

NZD/AUD Chartpack

Jason Wong -

NZD/AUD Summary:

• NZD/AUD trades near the top end of its 5-year trading range, slightly above our LT and ST fair value estimates.
• We see this as justified, given some of the current negative forces that weigh on Australia, such as concerns about its housing market and closer ties to a slowing Chinese economy.
• We see the higher trading range for the cross being sustained through 1H19, with projections consistent with a 0.93-0.98 trading range, before the cross reverses course later in the year.

NZD Review and 2019 Outlook

Jason Wong -

2018 Review
The NZD showed mixed performance through 2018, weakening against the USD and JPY and outperforming the other key commodity currencies, AUD and CAD. Performance of the NZD on EUR, GBP, and CNY crosses depends on measurement. Taking the spot rate as at the end of 2018 and 2017, the NZD showed little movement. Using December month averages, the NZD ended up stronger on these crosses.

NZD Corporate FX Update

Jason Wong -

The NZD showed a strong recovery in November, breaking its prior six-month downward trend. Over recent weeks it has been trading slightly rich compared to our short-term fair value model estimate, which has hovered around 0.66-0.67.

NZD/AUD to sustain a higher range

Jason Wong -

In our early October FX forecast update, we had the AUD falling back to 0.71 and NZD to 0.65 by year end, on the premise that the US would press ahead with lifting the tariff rate on $200bn worth of Chinese imports to 25% from Jan 1st and confirm it was extending tariffs early in 2019 to the whole gamut of Chinese imports.

NZD Recovers, Now What?

Jason Wong -

The NZD has been the best performing major developed currency over the past month. After reaching a multi-year low of 0.6425 in early October, a strong rally has seen it rise to as high as 0.6884, a level not seen since June.

Economy Watch

Holiday Lull

BNZ - BusinessNZ -

New Zealand’s manufacturing sector experienced a lower level of expansion for the first month of 2019, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

RBNZ Holds Fast

Stephen Toplis -

The reaction to today’s Monetary Policy Statement indicates that financial markets saw the missive as being more hawkish than anticipated. The NZD is up over 1.0% and the chance of a near term cut in interest rates has been significantly reduced. From our perspective, we simply could not understand why the Reserve Bank would adopt a dovish bias when inflation was broadly at target, employment was at or above its maximum sustainable level and the outlook was for growth to continue at near- trend. And so it came to be. It is only when forecasts can reveal both inflation and employment deviating from target (in the same direction) that one can be confident that interest rates are about to move. In our forecasts there is no sign of this happening, in a sustainable fashion, any time soon.

RBNZ Fully Employed

Stephen Toplis -

Financial markets clearly want to price in a cut in New Zealand’s cash rate. Today’s labour market data unequivocally came in weaker than market expectations but participants seem to have completely overlooked the fact that the overall picture remains relatively indifferent to what the RBNZ had assumed when it put together its November 2018 Monetary Policy Statement (MPS).

Inflation Grinding Higher, At Heart

Craig Ebert -

Imaginings that New Zealand’s inflation was losing its way were put to bed by this morning’s December quarter CPI report. Sure, it registered an increase of just 0.1%. But that was suppressed by seasonality. More instructively, the annual rate of CPI inflation stayed at 1.9% in Q4. And the core measures that Statistics NZ published were running at least as strongly as this.

BNZ PSI - Holiday Mode

Doug Steel -

New Zealand’s services sector experienced a further dip in expansion levels
during December, according to the BNZ - BusinessNZ Performance of Services
Index (PSI).

BNZ PMI - Stocked Up

Craig Ebert -

New Zealand’s manufacturing sector experienced a positive end to 2018,
according to the latest BNZ - BusinessNZ Performance of Manufacturing Index
(PMI).

QSBO Highlights Cyclical Stretch

Craig Ebert -

Just how hot is the NZ economy? Judging by pricing intentions in this morning’s Quarterly Survey of Business Opinion (QSBO), not very. But look at the survey’s capacity constraint variables and it’s clear the economy is relatively heated. And that this is likely to remain the case for a while yet, with the QSBO’s improved growth measures more consistent with annual GDP running around trend (2.5-3.0%).

Oil Pressure On External Deficit To Ease

Doug Steel -


New Zealand’s current account deficit widened to 3.6% of GDP for the year to September 2018 from 3.3% in the year to June 2018. This matched market (and our) expectations so nothing to cause market movement. But it’s worth noting that this is the largest annual deficit since 2009. Higher oil prices contributed to a bigger deficit in Q3, but a recent collapse will see the reverse over coming quarters.

(Most) Businesses Shake Some of Their Gloom

Craig Ebert -

As much as today’s ANZ survey might have started running to the rescue of our middling macro-economic forecasts (no thanks to agriculture), it also registered a cooling in its inflation gauges. However, the details revealed that the drop in inflation expectations was very much concentrated in the retail sector; but also that the retail sector lifted its own-pricing intentions to +46.2, from an already-high +42.4 in November.

Slower Pace

BNZ Research/Business NZ -

New Zealand’s services sector experienced a decrease in expansion levels during November, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

BNZ Bankers Survey - Full Report

BNZ -

BNZ’s bankers launch a new measure of business, conditions and confidence in NZ
December 17 2018 - If you really want to know how the economy is performing, ask a banker who knows their customer well. That’s the premise behind Bank of New Zealand’s Quarterly Business Bankers’ Survey launched today.

BNZ Bankers Survey - Dashboard

BNZ -


BNZ’s bankers launch a new measure of business, conditions and confidence in NZ
December 17 2018 - If you really want to know how the economy is performing, ask a banker who knows their customer well. That’s the premise behind Bank of New Zealand’s Quarterly Business Bankers’ Survey launched today.

Holding Firm

Craig Ebert -

Activity in New Zealand’s manufacturing sector for November experienced a similar result to the previous month, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

Fiscal Forecasts Weather Toned-Down GDP

Craig Ebert -

Today’s Half-year Economic and Fiscal Update (HYEFU) was, in broad respect, very similar to the May Budget, as we expected it would be. Yes, there was a little bit of surplus pruning regarding the nearer term. But this was the consequence of toned-down economic forecasts, which now look less vulnerable to disappointment. So the end result is arguably a more assured set of fiscal projections.

GDP Wellbeing Back In Focus

Craig Ebert -


Gross Domestic Product (GDP) doesn’t matter…until it does. And it did today, with its September quarter growth sagging to 0.3%, compared to market expectations of 0.6%. Upward revisions to recent history helped soften the blow. And the Q3 GDP details only shored up our view that Q4 GDP will expand solidly. However, the Q3 GDP outcome, patchy as it was, adds to other factors likely to nourish the Reserve Bank’s dovish leanings.

Activity Defying Confidence

Doug Steel -

Economic activity has been doing better than weak confidence readings would have you believe. This applies to agriculture as much as it does to the wider economy. Tractor registrations are at their highest level since the 1970s. Sure the outlook has soften a little in some areas, like dairy prices, albeit that this has been partly driven by very strong milk production on generally favourable weather conditions. Lamb prices remain strong.

RBNZ in Summer Hibernation

Stephen Toplis -

We reckon there is a strong argument for interest rate normalisation. New Zealand is at maximum sustainable employment, the output gap is zero and inflation, both headline and underlying, is near 2.0%. Be that as it may, there is clear RBNZ reluctance to shift rates higher and it is fair to say that there is little evidence that inflation is about to get out of control with rates where they are. Consequently, we find ourselves lowering our prospective interest rate track and suggest current market pricing is about right, for now at least.

ANZ Survey: Same Old, Same Old

Stephen Toplis -

There was nothing in today’s ANZ Business Outlook to change our view of the world. And, importantly, we doubt there was anything in it to change the central bank’s perceptions either.

Financial Markets Wrap

Strong recovery in risk appetite supports NZD

Jason Wong -

• Emerging market and commodity currencies like the NZD outperformed in January.
• Change in Fed guidance and positive US-China trade talk vibe supported a strong recovery in risk assets.
• NZ and global rates head lower.

BNZ Financial Markets Wrap

Jason Wong -

• Global equities plunge; Risk appetite index down to a multi-year low
• NZD underperforms alongside other commodity currencies and risk assets
• NZ rates down to multi-year lows

NZD Recovers Strongly in November

Jason Wong -

• The NZD bounced back strongly, up 5½% for the month
• Supported by optimism on US-China trade relations, a less hawkish Fed outlook, and positive domestic data
• NZ rates higher against a backdrop of lower global rates

Interest Rate Strategy

Outlook for Borrowers: Post-February MPS

Nick Smyth -

At the February Monetary Policy Statement (MPS), the RBNZ reiterated that it expects to keep the OCR on hold for the foreseeable future. It pushed back its expected timing of the first rate hike by six months, to mid-2021.

Trade Idea: Sell NZGB 23s against 21s and 29s

Nick Smyth -

• The belly of the NZ curve has significantly outperformed over the past few months, with 2s5s10s in swaps reaching post-GFC lows at -25bps.
• We see an opportunity to position for a reversal in NZGBs, selling 23s against 21s and 29s. Unlike swaps, the NZGB fly is positive carry and roll.
• We think the fly offers an asymmetric risk-reward profile from here and can perform in both bullish and bearish scenarios.
• With 2023s trading below the OCR we expect offshore investors to extend down the curve in search for yield.
• Investor holdings data suggests that NZ banks are reasonably well positioned for the upcoming Q1 high-grade maturities, meaning domestic demand for the belly of the curve may be more restrained going forward.
• We appreciate a NZGB fly isn’t for everyone. Investors may want to consider a 23s29s flattener, which should work in a ‘rolling flattening’ environment. Investors looking to position for a reversal in NZ rates may want to consider selling 2023s outright.

Outlook for Borrowers: January Interim Update

Nick Smyth -

Since the November Borrowers Update, there have been substantial declines in wholesale fixed rates. Short-term wholesale fixed rates declined to their lowest levels on record a few weeks back, while longer-term fixed rates have fallen to within vicinity of record lows. The market has reverted to pricing an almost 50% chance of an OCR cut by the end of 2019.

NZ Breakevens – Reiterating The Value Case After NZ CPI

Nick Smyth -

NZ breakevens (BEIs) reached multi-year lows earlier this year, with the 10 year NZ BEI hitting 1%. The narrowing in NZ BEIs has occurred amidst the rally in nominal bond yields over the past few months. BEIs remain highly directional with broader moves in rates.

NZ Rates Outlook: Scaling Back Our Bearish Expectations

Nick Smyth -

In early November we made the medium-term case for paying NZ swaps. We thought the market would struggle to push out the timing of OCR hikes much further, NZ rates looked expensive on a cross-market basis and in relation to broader macro fundamentals, and the market was positioned long and vulnerable to re-pricing sharply higher in the event macro data made RBNZ hikes look more likely. Additionally, we saw upside risks to global rates and expected the market to ultimately revise up its Fed expectations, helping to push US yields higher.

RBNZ Proposed Capital Requirements: Preliminary Thoughts

Nick Smyth -

Last Friday, the RBNZ released a consultation paper proposing to increase the required Tier 1 capital ratio from 8.5% to 16% for the “Big 4” NZ banks (15% for smaller banks). Additionally, the RBNZ proposed to increase the “IRB scalar” applied to model-based risk-weighted assets (RWAs) from 1.06 to 1.2. This will also have the effect of further increasing large banks’ capital requirements.

Trade Idea: Long NZGB 2029 vs. Pay Swap

Nick Smyth -

After reaching new wides just over a week ago, swap spreads have snapped back over the past week (see Chart 1). The long-end of the NZGB curve has led the underperformance over the past week.

Markets Outlook

RBNZ One Of The Crowd

BNZ Research Team -

Wednesday’s RBNZ Monetary Policy Statement (MPS) is front and centre for the market this week. The Official Cash Rate is unanimously expected to be held steady at 1.75%. But the market has become increasingly aggressive in pricing the chance of a cut later this year. The Bank’s commentary will give important direction, after a virtual 3-month vacuum from the Bank in this regard.

Labour Market Still Trending Tighter

BNZ Research Team -

Thursday’s Household Labour Force Survey (HLFS) is prone to look slower. But only in a statistical sense, after outsized gains in its employment measure in Q3, and plunge in unemployment, to 3.9%. The Q4 HLFS should not give any respite to nominal wage and salary inflation, therefore, which we believe remains firmly biased northward.

Statistics NZ Slashes Migration

BNZ Research Team -

Statistics New Zealand’s new way of measuring migration should trim population growth estimates over the last few years. Our back of the envelope suggests 0.3% less over each of the last couple of years, and a cumulate reduction of about 45,000 over the last four years. This should boost macro-based measures of productivity, by definition. It also takes a lot of pressure off the supposed housing shortage, in the stroke of a pen. These are just a taste of the many things we’ll have to think through and monitor, with respect to the NZ economy, as a consequence of the new way Statistics NZ is measuring migration.

BNZ Markets Outlook - Headline CPI Inflation to Belie Core Pressure

Craig Ebert -

• CPI prone to undershoot RBNZ expectations
• But core inflation pressures remain in full force
• Which should keep the Reserve Bank thinking
• Slower PSI (53.0) counters stronger PMI (55.1)
• Migration/tourism data due (separately) Friday

The headline CPI is prone to undershoot recent RBNZ expectations. And not just in Q4 figures due to be published tomorrow, but running into calendar 2019 as well. However, as last week’s Quarterly Survey of Business Opinion (QSBO) highlighted, the underlying drivers of inflation remain firmly in force. This should have the Bank thinking twice before acting on its dovish signals.

2019: A Dawning Sense of Realism

BNZ Research Team -

As 2019 gets underway, a sense of realism appears to be setting in to markets. Compared to a few months ago, equities have taken a knock. While measures of volatility/risk have come back on the radar after a long slumber. Realism on the economic front is a matter of accepting that the post-GFC expansion is now very long in the tooth. This brings with it the likelihood of apparently-weak GDP growth, but also the risk of surprisingly resilient inflation.

Advance New Zealand Fair

BNZ Research Team -

The more we look around, the more resilience we see in New Zealand’s economic data and anecdotal evidence. This is not to say the economy is roaring away, or is immune from a marked slowdown at some stage. But, for now, it is emanating a tone of fortitude.

Manufacturing Clobbers GDP

BNZ Research Team -

It appears that the pressure on the Reserve Bank to hike interest rates any time soon is dissipating. Not only are petrol prices and the NZD depressing short term inflation measures but it now also looks like growth could come in on the lower side of RBNZ expectations.

Economic Growth Remains Defiant

BNZ Research Team -

It seems to us that the economy continues to forge ahead in a far more robust fashion than many of the business confidence indicators might have you believe. There’s no doubt confidence is being rocked by a combination of uncertainty, capacity restrictions and margin pressure. But actual economic output continues to grow. With this in mind, we will be watching this week’s suite of partial indicators for confirmation that Q3 GDP held up. At this stage we are forecasting an increase of 0.7% for the quarter, 2.9% for the year. This is the same pick as the RBNZ.

BNZ Markets Today

Jason Wong -

Currency markets are treading water ahead of the important Xi-Trump meeting this weekend. US equities are modestly lower through the morning session, while the US 10-year rate is back near the NZ close of 3.03% after earlier breaking below 3%.

Q3 Retail Volumes Pinched By Petrol Prices

BNZ Research Team -

All things considered, we are not freaked out by the apparent stalling in Q3 retail spending. Indeed, when thinking through the various timing influences, we probably need to bump up our expectation on Q4 retail trade growth.

Markets Today

BNZ Markets Today

Nick Smyth -

Global rates fell overnight after a much weaker than expected US retail sales release raised concern about the extent of slowing in the US economy. The retail sales release also hit equity markets, which had initially been supported by reports that the US was considering a 60 day extension to the trade war ceasefire. The S&P500 has recovered to be flat on the day however. The NZD has outperformed amidst further short-covering in the wake of Wednesday’s RBNZ MPS while NZ swap rates rose again yesterday.

BNZ Markets Today

Nick Smyth -

The positive sentiment of the past few trading sessions, on hopes of an extension to the US-China trade war ceasefire and an agreement to fund the US government, continues to linger. Global equity markets have moved higher again, although US indices are now only slightly up on the day. The NZD is the top performing currency over the past 24 hours, after the RBNZ MPS was seen as less dovish than expected, although it has eased back overnight from the highs reached yesterday. NZ rates were higher across the curve yesterday as the market pared back OCR rate cut expectations.

BNZ Markets Today

Nick Smyth -

Markets are trading with a risk-on tone as hopes grow for an extension to the trade war ceasefire between the US and China. Democratic and Republican negotiators also came to an agreement in principle to avert another US government shutdown, although Trump still needs to sign it off. Global equities and bond yields have moved higher. The USD has fallen back from its year-to-date highs overnight amidst the improvement in risk sentiment. The NZD is unchanged ahead of the RBNZ today.

BNZ Markets Today

Nick Smyth -

Equity markets moved higher across Asia and Europe overnight, and are slightly up in US, ahead of the resumption of US-China trade talks this week. The USD has again strengthened overnight, with the various USD indices at, or close to, their highest levels this year. The NZD is down slightly on the day against the USD, but is up on all the crosses, on short-covering ahead of the RBNZ meeting tomorrow. Similarly, NZ rates bounced modestly yesterday on profit-taking ahead of the RBNZ meeting.

BNZ Markets Today

Nick Smyth -

Global markets traded with a risk-off tone for most of Friday after Trump said he wasn’t planning to meet President Xi before US tariffs on China are due to step-up on March 1st. Equity markets fell across Asia and Europe, although a late bounce in US equities left them marginally higher on the day. The NZD was little changed on the day, but NZ rates experienced another sizable fall, with the 10 year NZ government bond yield hitting a record low level.

BNZ Markets Today

Jason Wong -

A risk-off tone has enveloped markets, with more reminders of the weaker global growth backdrop. US equities are currently down 1.5% after a similar fall in Europe, while US and Germany 10-year rates are lower. The NZD is little changed from the NZ close but is still the weakest performer after the negative reaction to softer labour market data yesterday.

BNZ Markets Today

Jason Wong -

In light trading conditions, US equities are slightly weaker and US rates are slightly lower. In currency markets, AUD is the clear underperformer, following RBA Governor Lowe’s speech yesterday afternoon, with some negative spillover effect for the NZD, even as dairy prices continue to surge.

BNZ Markets Today

Jason Wong -

On a slow news day, US Treasury yields have extended their rise following the strong US data reports on Friday, supporting a broadly-based, albeit modest, rally in the USD, while the S&P500 shows modest gains.

BNZ Markets Today

Jasn Wong -

Strong US data on Friday saw US Treasury rates move 4-7bps higher across the curve. The rise in rates tempered the lift in US equities, while currency movements were generally modest, apart from some softness in the yen.

BNZ Markets Today

Nick Smyth -

Events Round-Up
US: Fed funds target rate (upper bound): 2.5% vs. 2.5% exp.
CH: Non-manufacturing PMI, Jan: 54.7 vs. 53.8 exp.
CH: Manufacturing PMI, Jan: 49.5 vs. 49.3 exp.
EC: GDP (q/q%), Q4: 0.2 vs. 0.2 exp.
US: Employment cost index (q/q%), Q4: 0.7 vs. 0.8 exp.
CA: GDP (m/m%), Nov: -0.1 vs. -0.1 exp.
US: New home sales (k), Nov: 657 vs. 570 exp.
US: Initial jobless claims (k): 253 vs. 215 exp.
US: Chicago PMI, Jan: 56.7 vs. 61.5 exp.

Good Morning
Markets are trading in risk-on mode. US equities have extended gains made in the aftermath of the dovish FOMC meeting yesterday morning, helped by better corporate earnings results. US Treasury yields have continued to move lower as the market digests the Fed’s switch to a neutral bias, while the USD is trading at a four-month low. The NZD has increased to its highest level since early December amidst broad-based USD weakness.

BNZ Markets Today

Nick Smyth -

US equities have had a good night after Apple’s earnings results weren’t as bad as some feared and Boeing’s earnings beat expectations by a significant margin. Focus now turns to the FOMC meeting at 8am, followed shortly after by Chair Powell’s press conference. The AUD has outperformed after a marginally better than expected CPI release, and this has seen NZD/AUD drift back to 0.95. The NZD is again broadly unchanged against the USD.

BNZ Markets Today

Nick Smyth -

Events Round-Up
NZ: Trade balance (NZ$m), Dec: 264 vs. 150 exp.
AU: NAB business conditions, Dec: 2 vs. 11 prev.
US: Conference board consumer confidence, Jan: 120.2 vs. 124.6 exp.

Good Morning
Markets are in a holding pattern ahead of the big event risks over the remainder of the week. These include the FOMC meeting tomorrow, US-China trade talks which kick off tonight, payrolls on Friday, and earnings reports from some of the large US tech firms (including Apple later this morning). Currency moves have been reasonably modest, but the NZD/AUD has pushed up to near 18 month highs after a disappointing NAB business survey. The NZD is little changed against the USD.

BNZ Markets Today

Nick Smyth -

Global equities reversed all their gains from Friday after Caterpillar’s earnings missed expectations and chipmaker Nvidia downgraded its revenue guidance for this year. Both firms cited weaker growth in China. There is a risk-off tone to markets more broadly, with Treasury yields falling modestly and the Japanese yen outperforming. The NZD is unchanged this week, and continues to hover close to its year-to-date highs.

BNZ Markets Today

Doug Steel -

An air of optimism spread through markets on Friday night with a risk on vibe seeing equities, commodities, and bond rates higher. This despite more poor economic news out of Europe. The US dollar weakened.

BNZ Markets Today

Jason Wong -

Events Round-Up
AU: Employment change (k), Dec: 21.6 vs. 18.0 exp.
AU: Unemployment rate (%), Dec: 5.0 vs. 5.1 exp.
GE: Markit manufacturing PMI, Jan: 49.9 vs. 51.5 exp.
GE: Markit services PMI, Jan: 53.1 vs. 52.1 exp.
EC: Markit manufacturing PMI, Jan: 50.5 vs. 51.5 exp.
EC: Markit services PMI, Jan: 50.8 vs. 51.5 exp.
EC: ECB deposit facility rate (%), Jan: -0.4 vs. -0.4 exp.
US: Initial jobless claims (wk to 19 Jan): 199k vs 218k exp.
US: Markit manufacturing PMI, Jan: 54.9 vs. 53.5 exp.
US: Markit services PMI, Jan: 54.2 vs. 54.0 exp.

Good Morning
Soft euro-area PMI data and downside growth risks seen by the ECB have dragged down European rates and the euro, spilling over into lower US Treasury yields. Against that backdrop, the USD is broadly higher, while the AUD has underperformed after NAB raised mortgage rates.

BNZ Markets Today

Jason Wong -

The NZD is stronger after yesterday’s CPI report while GBP is stronger on reducing risks for a no-deal Brexit. Outside those moves, there is little other price action. US equities are retreating after a positive open.

BNZ Markets Today

Jason Wong -

Events Round-Up
NZ: Perform. of services index, Dec: 53.0 vs. 53.4 prev.
UK: Unemployment rate (%), Nov: 4.0 vs. 4.1 exp.
UK: Avg weekly earnings (y/y%), Nov: 3.4 vs. 3.3 exp.
GE: ZEW survey expectations. Jan: -15.0 vs. -18.5 exp.
US: Existing home sales (m), Dec: 4.99 vs. 5.24 exp.

Good Morning
Market sentiment has deteriorated, with global equities and bond yields lower. Most major currencies haven’t showed a lot of movement. Commodity currencies are slightly weaker, except the NZD which has managed to hold its ground, while GBP is the strongest of the majors.

BNZ Markets Today

Jason Wong -

Events Round-Up
CH: Retail sales (y/y%), Dec: 8.2 vs. 8.1 exp.
CH: Industrial production (y/y%), Dec: 5.7 vs. 5.3 exp.
CH: Fixed assets (y/y%), Dec: 5.9 vs. 6.0 exp.
CH: GDP (y/y%), Q4: 6.4 vs. 6.4 exp.
Good Morning
Markets are quiet with the US celebrating the Martin Luther King Jr. public holiday. The NZD has tracked ideways overnight after drifting lower during the Wellington public holiday.

BNZ Markets Today

Nick Smyth -

Events Round-Up
AU: Home loans (m/m%), Nov: -0.9 vs. -1.5 exp.
EC: Core CPI (y/y%), Dec: 1 vs. 1 exp.
US: Philadelphia Fed business opinion, Jan: 17 vs. 9.5 exp
US: Initial jobless claims (k), Jan: 213 vs. 220 exp.

Good Morning
US equities have managed to inch a little higher overnight, despite the continued US government shutdown, disappointing earnings from Morgan Stanley and speculation that Trump might impose tariffs on auto imports. The NZD has underperformed again, as the market awaits CPI data next week.

BNZ Markets Today

Nick Smyth -

Risk sentiment continues to gradually improve, with better than expected earnings from US banks helping to support equity markets. Theresa May’s deal was voted down by a record margin, but the market sees a shift towards a softer Brexit and away from a no-deal scenario; GBP has bounced strongly from yesterday morning’s lows. The NZD has underperformed overnight and the NZ 2 year swap rate made a fresh low yesterday.

BNZ Markets Today

Nick Smyth -

Risk sentiment has improved overnight on news of tax cuts in China, with global equity markets higher and US bond yields inching up. But the main event is the UK parliamentary vote on Theresa May’s Brexit deal at 8am NZT, which will set the tone for risk assets and currencies in the day ahead. The GBP has weakened, and the USD strengthened, ahead of the vote. The NZD has moved lower despite an improvement in NZ business confidence and increase in dairy prices.

BNZ Markets Today

Nick Smyth -

Weak Chinese trade data released yesterday generated renewed concerns about global growth, pushing equity markets lower. Global rates are little changed however and currency movements have generally been contained. The GBP remains volatile ahead of the parliamentary vote on Theresa May’s deal tomorrow (UK time).

BNZ Markets Today

Nick Smyth -

US equity markets were unchanged on Friday, as risk sentiment continued to recover in the New Year. Global rates moved lower amid more dovish comments from Fed officials. Meanwhile, the NZD rose strongly on growing hopes of a US-China trade deal.

BNZ Markets Today

Jason Wong -

Market movements have been modest in the current session, with not a great deal to trade on. Commodity currencies are little changed overnight against a backdrop of a small bid returning to the USD against the other majors. US rates and equities are little changed.

BNZ Markets Today

Jason Wong -

Risk appetite continues to recover, with increased optimism that the US-China trade war will be resolved and some dovish Fed speakers adding to the case for a Fed pause in the tightening cycle. The USD is weaker across the board, while the NZD has been the best performer of the majors.

BNZ Markets Today

Jason Wong -

Happy New Year. In this first Markets Today for the year we begin with an overview of key events and market movements since Christmas. In illiquid market conditions we’ve seen some heightened volatility in equity and bond markets, while currency markets have been well-behaved apart from a “flash crash” a week ago.

BNZ Markets Today

Jason Wong -

Global equity markets are sinking deeper into the red, the US yield curve flattens further and the USD has weakened overnight, reversing some of its post-Fed gains yesterday. This leaves the NZD higher in overnight trading but still 1% down since this time yesterday.

BNZ Markets Today

Jason Wong -

Markets are quiet ahead of the FOMC announcement at 8am NZ time. The USD has drifted a little lower ahead of the announcement as has the US 10-year rate. The NZD is little changed.

BNZ Markets Today

Jason Wong -

After a couple of big daily falls US equities are up 0.8-1.2% but, as we’ve seen, anything can happen in the last few hours of the trading session. US bonds have rallied a little ahead of the US FOMC announcement tomorrow. Most currencies are little changed overnight. CAD is softer as oil prices continue to fall, while the NZD has sustained the gains it saw in local trading yesterday.

BNZ Markets Today

Nick Smyth -

Equity markets have weakened again overnight amid a broader risk-off tone to markets. The NZD is little changed ahead of the Federal Reserve meeting and NZ GDP on Thursday morning.

BNZ Markets Today

Nick Smyth -

Global equity markets got hammered again on Friday amid growing concerns about the global growth outlook. Both Chinese activity data and the European PMIs were much weaker than expected. The USD briefly made a fresh 18-month high, with strong US retail sales release adding weight to the narrative that the US economy is outperforming the rest of the world. The NZD was hit by the weaker Chinese data and the RBNZ’s announcement that it was proposing to significantly increase the amount of capital NZ banks need to hold.

BNZ Markets Today

Nick SMyth -

It has been a relatively quiet night in markets overnight, with no fresh developments on the US-China trade front and no major economic data released. The ECB said it would end its QE programme, as planned, at the end of this month, although Draghi alluded to growing downside risks to growth; the EUR is slightly lower as a result. The NZD has been relatively stable.

BNZ Markets Today

Nick Smyth -

US equities have risen strongly overnight on a series of positive reports on US-China trade talks, including reports that China might revamp its Made in China 2025 industrial policy. The GBP has also recovered sharply, as the market anticipates that Theresa May will win a leadership challenge in a few hours’ time. The NZD has fallen, despite a broadly weaker USD.

BNZ Markets Today

Nick Smyth -

Events Round-Up
NZ: ANZ Truckometer - heavy (m/m%), Nov: -1.9 vs. 4.6 prev.
NZ: Retail card spending (m/m%), Nov: -0.4 vs. 0.3 prev.
AU: NAB business conditions, Nov: 11 vs. 12 prev.
AU: House price index (q/q%), Q3: -1.5 vs. -1.6 exp.
UK: Unemployment rate, Oct: 4.1 vs. 4.1 exp.
UK: Employment change (k), Oct: 79k vs. 25 exp.
UK: Average weekly earnings ex-bonus (y/y%), Oct: 3.3 vs. 3.2 exp.
GE: ZEW survey expectations, Dec: -17.5 vs. -25 exp.
US: NFIB small business optimism, Nov:104.8 vs. 107 exp.
US: PPI ex food and energy (y/y%), Nov: 2.7 vs. 2.5 exp.

Good Morning
Market sentiment has improved somewhat over the past 24 hours following news that the US and China have had high-level dialogue on trade and reports that China would cut tariffs on imported US cars. Confidence remains fragile however and US equities have already pared most of their earlier gains. The GBP remains weak amidst speculation of a leadership challenge to PM May. The NZD is unchanged from this time yesterday, but higher on most of the crosses.

BNZ Markets Today

Nick Smyth -

The British pound was hammered overnight after Theresa May unexpectedly postponed the parliamentary vote on her Brexit deal. With the clock ticking to the March 29th exit date, the market is concerned about the growing risk that the UK could slide into a no-deal Brexit. The news exacerbated already fragile risk sentiment, with US equities falling again, although they have recovered somewhat over the past hour or so. The NZD has outperformed amidst the risk-off backdrop, and the NZD/AUD has made a fresh 18-month high.

BNZ Markets Today

Nick Smyth -

The British pound was hammered overnight after Theresa May unexpectedly postponed the parliamentary vote on her Brexit deal. With the clock ticking to the March 29th exit date, the market is concerned about the growing risk that the UK could slide into a no-deal Brexit. The news exacerbated already fragile risk sentiment, with US equities falling again, although they have recovered somewhat over the past hour or so. The NZD has outperformed amidst the risk-off backdrop, and the NZD/AUD has made a fresh 18-month high.

BNZ Markets Today

Nick Smyth -

US equities fell sharply again on Friday amid a renewed bout of risk aversion. The risk-off backdrop pushed US bond yields lower, with a weaker-than-expected payrolls report and dovish comments from Fed Governor Brainard adding to the downward pressure. Currencies saw relatively little movement, although the NZD drifted lower on the day. Finally, OPEC announced a larger than expected 1.2m barrels per day supply cut, which boosted oil prices.

BNZ Markets Today

Jason Wong -

Events Round-Up
AU: Trade balance ($m), Oct: 2316 vs. 3000 exp.
AU: Retail sales (m/m%), Oct: 0.3 vs. 0.3 exp.
GE: Factory orders (m/m%), Oct: 0.3 vs. -0.4 exp.
US: ADP employment chg (k), Nov: 179 vs. 195 exp.
US: Trade balance ($b), Oct: -55.5 vs. -55.0 exp.
US: ISM non-manufacturing index, Nov: 60.7 vs. 59.0 exp.

Good Morning
Risk appetite has taken another hit which sees safe-haven currencies like JPY and CHF outperform, while commodity currencies have underperformed. Global equity markets are a lot lower, while US 10 year rates are down to a fresh 3-month low.

BNZ Markets Today

Jason Wong -

Events Round-Up
NZ: Volume of building work (q/q%), Q3: 0.7 vs. 2.3 exp.
AU: GDP (q/q%), Q3: 0.3 vs. 0.6 exp.
AU: GDP (y/y%), Q3: 2.8 vs. 3.3 exp.
CH: Caixin PMI services, Nov: 53.8 vs. 50.7 exp.
UK: Services PMI, Nov: 50.4 vs. 52.5 exp.
CA: Bank of Canada O/N rate (%): Dec: 1.75 vs. 1.75 exp.

Good Morning
Trading conditions are quiet with the US on holiday to mark the death of President George HW Bush. The AUD and CAD are the weakest performers after weak data and a dovish monetary policy statement respectively, while GBP is better bid after a poor run recently.

BNZ Markets Today

Jason Wong -

The risk-on rally post the Xi-Trump meeting hasn’t lasted long, with risk assets reversing course. Equities and bond yields are lower and, overnight, commodity currencies have drifted lower, while JPY is the best performing major currency. Brexit woes continue to impair GBP.

BNZ Markets Today

Jason Wong -

The “highly successful” Xi-Trump meeting at the weekend triggered an improvement in risk sentiment to begin the new week, seeing equity markets rise and commodity currencies outperform. US 10 year rates opened higher, but have fallen away to be little changed just under 3%.

BNZ Markets Today

Jason Wong -

Trading on Friday was fairly subdued as markets awaited the highly anticipated Xi-Trump meeting held at the weekend. US equities were stronger, US rates were lower, while the NZD closed near its recent highs.

BNZ Markets Today

Jason Wong -

Currency markets are treading water ahead of the important Xi-Trump meeting this weekend. US equities are modestly lower through the morning session, while the US 10-year rate is back near the NZ close of 3.03% after earlier breaking below 3%.

BNZ Markets Today

Nick Smyth -

US equities have surged higher and the USD has weakened after Fed Chair Powell said interest rates were “just below” neutral, a marked change from his assessment last month. Short-end Treasury yields have fallen and the curve steepened.

BNZ Markets Today

Nick Smyth -

Market movements have been reasonably modest overnight as we await Fed Chair Powell’s speech tomorrow and the Trump-Xi meeting on the weekend. There was little reaction to a speech from Fed vice Chair Clarida overnight. The USD is broadly higher once again, although the NZD has bucked the trend and is up slightly on the day.

BNZ Markets Today

Nick Smyth -

Risk appetite has improved overnight, with equities and US bond yields rising, and crude oil recovering some of its large falls on Friday. Signs of compromise from the Italian government over its budget plans helped boost sentiment, and led to a sharp drop in Italian yields. Currency moves have been modest as we await a barrage of Fed-speak over the remainder of the week and the Trump-Xi meeting at the G20 on the weekend.

BNZ Markets Outlook

Nick Smyth -

US equities ended the week on a soft note and US Treasury yields declined slightly, although volumes were light on a shortened trading day in the US. The EUR weakened, and the USD strengthened, after another batch of weaker than expected Eurozone PMI surveys. Meanwhile, oil prices remained in free-fall due to concerns about oversupply in the market.

BNZ Markets Today

Jason Wong -

Markets are quiet with the US on holiday. The only notable movement has been strength in GBP after a draft UK and EU political declaration was published. The NZD was modestly weaker in local trading yesterday and has sustained that move overnight.

BNZ Markets Today

Jason Wong -

Market sentiment has perked up leading into the US Thanksgiving holiday tonight, seeing global equities higher, a modest rise in global rates and supporting commodity currencies.

BNZ Markets Today

Doug Steel -

Equities lurch lower again, denting risk appetite. The US dollar has pushed higher across the board, arresting its slide over the past week. Meanwhile, the plunge in oil prices continues. Little change in yields.

BNZ Markets Today

Brendan Marsh -

The week ahead holds little in store in terms of key data releases or central bank meetings and includes the US out later in the week for Thanksgiving, however, there’s still been a couple of pressure points albeit from familiar sources for markets to respond to at the start of an abbreviated week.

Rural Wrap

Food Prices In An Uncertain World

Doug Steel -

World economic growth is slowing with concerns that it might turn into a slump. This raises downside risks to NZ’s primary product prices. We expect further deceleration in the world economy, but not a deep downturn. Uncertainty indicators are very high. Oil prices are lower; so too equity markets. But food prices have fared better. If the world economy can hold together well enough, NZ’s product prices are expected to be flat to up this year on average aided by pockets of supply side tightness.

Activity Defying Confidence

Doug Steel -

Economic activity has been doing better than weak confidence readings would have you believe. This applies to agriculture as much as it does to the wider economy. Tractor registrations are at their highest level since the 1970s. Sure the outlook has soften a little in some areas, like dairy prices, albeit that this has been partly driven by very strong milk production on generally favourable weather conditions. Lamb prices remain strong.