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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Currency Research

NZD: Enough Weakness For Now?

Jason Wong -
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Market sentiment for the NZD has been poor, evidenced by the near-7% plunge since recently peaking on 12-April, from around USD 0.74 to below USD 0.69. Unjustified net long positioning near the peak has exaggerated the move, alongside the broadly based recovery in the USD.

NZD Corporate FX Update

Jason Wong -
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In the near term we see the NZD sustaining the recent move lower and doing a bit of work in the 0.70-0.72 area. We’ve already seen dips below 0.70 and they should become more frequent as the year progresses alongside the continuing gradual rise in NZD headwinds.

NZD Back Down To Reality

Jason Wong -
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The NZD has finally broken out of its well-established and fairly tight range held (roughly 0.72-0.74) since the first week of 2018. It has been a broadly based sell-off with the NZD down all on the major crosses. It has been a steady fall, with NZD/USD and NZD/EUR down for 9 consecutive days (on NY closes). From its peak on 12-April, the NZD has fallen by 2-4% on the various crosses.

NZD Positioning Signal Reads Overbought?

Jason Wong -
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Each week the CFTC publishes data that provide a useful gauge on net speculative positioning in currencies and other financial market variables such as commodities and US Treasuries. We normally give the data a glance and then move on quickly. However, it piques our interest when positioning gets to extreme levels – the theory being that one-sided positioning might give a good contrarian signal for the outlook.

NZD/AUD: Reverse Swing Ahead?

Jason Wong -
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Our last major note on the NZD/AUD cross rate was back in August last year, where we toned down our exuberance for the cross and suggested an AUD 0.91-0.95 range through to the end of 2018. That view has largely played out apart from a downside breach late last year as NZ political risk dominated pricing, but this wasn’t sustained.

NZD/CAD: Canada (Home and) Dry?

Jason Wong -
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Last week we saw intensification of concerns over US trade actions against China and the likelihood of retaliatory measures from China against the US usurped the FOMC meeting as the key driver of market price action – in equities and FX at least. And Friday night saw higher Canada CPI inflation, with all key core measures now hovering around target at 2%. The Canadian dollar outperformed both the Australian and New Zealand dollars, with CAD proving to be the best performing G10 currency, with AUD and NZD both in the bottom four.

NZD Corporate FX Update

Jason Wong -
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Through 2018 so far, the NZD has met some resistance around 0.7440, with weaker risk appetite recently driving the NZD back down to 0.72, in line with our end-Q1 and Q2 targets set earlier this year. Trade protectionism has reared its ugly head again, following President Trump’s imposition of import tariffs on various products including steel and aluminium. This theme is likely to continue into the second quarter, with Trump targeting a $100bn reduction in the US trade deficit with China. We have yet to see other countries retaliate, but if Trump continues down this path then some backlash seems inevitable. However, we still don’t think that a full-on global trade war is likely and we see the real economic impact of what we would call tweaks to trade policy as limited.

NZD/JPY: The Case For Further Downward Pressure

Jason Wong -
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Earlier this year (see NZD Corporate FX Update) we turned more bullish on the yen, revising our NZD/JPY forecasts significantly lower to show a trend decline in the cross through the next few years, taking it to 68 by the end of 2020. Since then we’ve already seen a 3-4% move lower in the cross from 80 to 77, moving down at a faster pace than projected (which is not unusual when it comes to currency forecasting!). In this note we flesh out our positive yen story.

Can the NZD weaken as the USD weakens?

Jason Wong -
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In our last major note towards the end of January “Weak USD Threatens Our NZD Call”, the USD TWI had just fallen for the seventh consecutive week, the NZD had breached the USD 0.74 mark and we wondered aloud how much longer this could continue. As it turns out, the freefall in the USD has stopped, with the currency entering a period of consolidation. This has seen the NZD held largely within a USD 0.72-0.74 trading range over recent weeks.

Economy Watch

What Will Fonterra Forecast?

Doug Steel -
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Today’s dairy auction result was a solid one ahead of Fonterra’s first forecast for the 2018/19 season. Dairy prices look that much better in the context of a falling NZD over recent weeks that has boosted NZ dollar denominated dairy prices. It sets the scene for a firm opening forecast for the 2018/19 season from Fonterra. We suspect financial markets would take a mid-$6 to $7 figure in its stride.

BNZ PMI - Boom!

Doug Steel -
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Boom!
The Performance of Manufacturing Index (PMI) looked a bit weak early in 2018, especially in comparison to its hearty pulse through 2017. We thought, at the time, the early-2018 slowdown may prove temporary – a view strongly supported by April’s hefty result. April’s PMI punched up to 58.9 from (an upwardly revised) 53.1 in March. It’s a move from so-so to outright strong. Of course, we wouldn’t want to over interpret one month’s result especially as it may have been, in part, artificially boosted by the timing of Easter. But, in the least, April’s result suggests the economy has not fallen off the rails (despite negative business confidence as measured in other surveys). And there’s a positive future signal in the PMI new orders index being back above 60 and well in excess of the inventory index. It all points to decent growth in Q2, after a soft Q1 for the manufacturing sector.

Clarity Defines Orr Debut

Stephen Toplis -
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The defining feature of Adrian Orr’s first Monetary Policy Statement (MPS) is the clarity of the message. Instead of having to flounder through screeds of mumblings to find out what the Bank really thinks, the message is up front. Symptomatic of this is the very first paragraph in the policy assessment which states: “The Official Cash Rate (OCR) will remain at 1.75 percent for some time to come. The direction of our next move is equally balanced, up or down”.

RBNZ Preview: Out with the old, in with the old

Stephen Toplis -
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Currently the market has New Zealand’s first rate hike fully priced in for the June 2019 OCR review. We’ve formally got February in our forecast track but, realistically, we are equivocating between February and May. On this basis, and, given what we think the RBNZ will say next Thursday, we believe minimal market reaction will be the order of the day. The risk is that market players read too much into any small changes in substance, or style, resulting in an unwarranted reaction.

Which Wage Information to Trust?

Craig Ebert -
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At face value, today’s slower Q1 Labour Cost Index (LCI) muddies the water on New Zealand’s inflation pulse – much like the recent slowing in annual headline CPI inflation has done. This feeds the idea of delay in respect to any policy tightening from the RBNZ. Yet we wouldn’t want to be dictated to by recent LCI (and CPI) prints, in this respect. Ultimately, it’s about looking forward. And considering wage measures other than the headline LCI would also present a more robust picture, in our view.

Lift In Service

Business NZ/BNZ -

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

Easing Off

BNZ - BusinessNZ -
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New Zealand’s level of manufacturing expansion decreased further in March,
according to the BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

QSBO Gets a Grip

Craig Ebert -
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In summary, today’s QSBO was very close to what we expected. While there was potential for it to look a bit better, because it doesn’t cover farmers (who are currently gloomy in their general outlook), it also seemed prone to the negative global rhetoric around trade, along with the recent market volatility. As it turned out, business sentiment found a floor, while its activity expectations were reasonable enough to suggest maintained pressure on resources.

BNZ Economy Watch - Deliberating Dairy

Doug Steel -
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Fonterra has lifted its milk price forecast for 2017/18 to $6.55 and so have we. This follows from generally higher international prices and a relatively stable NZD during 2018. We expect global dairy prices to drift lower in 2018, but downside risks have moderated with a higher Euro, higher oil prices, and robust dairy demand. Reflecting this, we lift our 2018/19 milk price forecast to $6.10. But with wide error bounds around any season-ahead milk price forecast, we look at some alternative scenarios.

Fed Hyperactive as RBNZ Hibernates

Stephen Toplis -
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We still think that the cash rate will increase in advance of the RBNZ’s expectations but there was nothing in today’s OCR review to suggest that the Bank is moving in that direction.

When No Inflation Is Good Inflation

Stephen Toplis -
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Ultimately inflation targeting is an intermediate objective. The ultimate role of monetary policy is to assist in creating an environment which maximizes the long term well-being of a country’s citizens. Removing, rather than creating, economic distortions must surely be a means to achieving this outcome. With this in mind we are hopeful that the new incoming Governor will take a more pragmatic stance to central banking than his predecessor and, in particular, be more openly aware of the ultimate goals of monetary policy rather than inflation targeting simply for inflation targeting’s sake.

US FOMC Preview – Data Supports a Hawkish Fed

Tapas Strickland, Gavin Friend -

US FOMC Preview – Data Supports a Hawkish Fed

Mixed Results

Craig Ebert -

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

On Average

BNZ - Business NZ -
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New Zealand’s level of manufacturing expansion decreased slightly in February, according to the BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

NZ Growth Dip Of Little Concern

Stephen Toplis -
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The New Zealand economy grew 0.6% through the fourth quarter of 2017. Compared with year earlier levels activity was up 2.9%. The quarterly outturn was modestly below expectations and resulted in a 30 pip fall in the NZD. In our opinion, the market response was probably unwarranted as: the data are very dated; the outcome was only 0.1% below that of the RBNZ’s expectations; and the figures are highly unlikely to result in any significant shift in forecasters’ views of the future.

Starting To Widen

Doug Steel -
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New Zealand’s external accounts remain off the market’s radar. One reason is a relatively small current account deficit. Another is a shrinking net external liability ratio. We expect the current account deficit to widen ahead, but remain contained by historical standards.

A Toast to a Half-Filled Tumbler

Craig Ebert -
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If New Zealand’s business glass appeared drained after the news of the new government, it has arguably just been topped up to half full. At one level, today’s ANZ business outlook survey was encouraging. Its net confidence reading, in particular, rebounded to -19, from its prior result, of -38, back in December. At another level, however, it obviously remains clearly below par, and thus well south of where it was riding, going into September’s election.

Retail Ripper

Doug Steel -
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The tills were ringing loudly in the final quarter of last year. Of course, they always do in the Christmas quarter but it was more than usual this time around.

Financial Markets Wrap

NZD Slumps in April

Jason Wong -
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After a volatile period through February and March, risk appetite improved during the month, reflected in a recovery in global equities and higher global bond yields. Currency markets played to a different tune, with broadly based weakness in the NZD going against that force.

NZD Flat in March

Jason Wong -
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• Global equity markets weak and volatile
• But little spillover for currency markets; NZD/USD and NZ TWI flat
• Safe-haven flows see global rates lower; NZ-US yield compression continues

Interest Rate Strategy

Post-RBNZ Update: Steepeners And Linkers Look Even Better

Nick Smyth -
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The headlines from the RBNZ were centred around the opening paragraph of the MPS, which stated the OCR “will” be on hold at 1.75% for “some time” – decisive language that reinforces the sense that rates likely aren’t going anywhere this year – and the explicit statement that the risk of the next move being a cut or a hike is equally balanced. See Clarity Defines Orr Debut for the team’s initial reaction to the MPS.

Outlook for Borrowers: Post May Monetary Policy Statement

Nick Smyth -
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RBNZ Monetary Policy Outlook
The May Monetary Policy Statement, the first under new Governor Adrian Orr, delivered a similar message to previous statements. The key message was that the
OCR “will remain at 1.75 percent for some time to come”. The apparent decisiveness of the statement – “will remain” – suggests the hurdle for a move in either direction this year is very high. The RBNZ’s projections incorporate the full first rate rise in early-2020.

NZ Linkers Are Cheap; 2035 BEI Widener

Nick Smyth -
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New Zealand inflation-indexed bonds, or linkers, offer the highest real yields in developed markets. The interpolated 10 year NZ real yield stands at around 1.55%, compared to around 0.8% on 10y US TIPS and Australian linkers, and negative real yields in Japan, Europe and the UK.

The US 2s10s Curve And The Risk Of Recession

Nick Smyth -
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The flattening of the US yield curve over the past two months (to the flattest levels since 2007) has come to the forefront of attention among both market participants and central bankers. Last week, San Francisco Fed President John Williams noted that an inverted curve “is a powerful signal of recessions” while Dallas Fed President Robert Kaplan said last year that the yield curve would be a factor he would consider when deciding on interest rates (a flatter curve implied “a little less operating flexibility at the Fed”).

Trade Idea: NZ 1y1y 2y1y Steepener

Nick Smyth -
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Global curves have flattened significantly over the past month and a half, with NZ being no exception. We highlighted two main risks when we recommended a 2s10s steepener in early March, namely a further rally in global rates and an intensification in funding pressures (FRA-OIS spreads) pushing up short-end swaps. As it transpired, both risks materialised, stopping us out of the position.

Interest Rate Strategy: LGFA 2022 Tender Preview

Nick Smyth -
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The NZ Local Government Funding Agency (“LGFA”) has announced that it will issue a new 2.75% coupon, 14 April 2022 maturity bond next Wednesday. The 2022 will be the first bond on the LGFA to have a maturity (or coupon) that doesn’t match an NZGB.

Outlook for Borrowers: Post March OCR Review

Nick Smyth -
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At the March OCR Review, the RBNZ kept the OCR on hold at 1.75%, as universally expected by economists. The Statement was largely a repeat of the version from February, with the Bank reiterating its expectation that growth should firm this year and inflation should eventually rise, after a dip in the coming quarters. The Bank finished by noting “numerous uncertainties” and reiterating a neutral policy stance. For reference, the last projections from the RBNZ in February had the first full rate hike in early-2020.

NZ Bank Bill-OIS and FRA-OIS Spreads – An Update

Nick Smyth -
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USD 3 month Libor-OIS has risen sharply over recent months, from a low of around 10bps in November to above 50bps now. The increase in USD Libor-OIS appears to have been driven by...

Trade idea: 2s10s NZ steepener

Nick Smyth -
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As we outlined earlier this year (see Taking Stock After NZ CPI), our bias is for a steeper NZ swaps curve in 2018. The primary rationale is that we see upside to UST yields from here and we expect the front-end of the NZ curve to remain anchored amid an unchanged OCR.

2029 NZGB Syndication RV

Nick Smyth -
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The NZDMO is scheduled to syndicate a new 2029 maturity bond before the end of June. The exact timing of the syndication is unknown, but long-dated swap spreads have narrowed over recent weeks which may indicate the market is building-in some concession ahead of a potential announcement. 2027 and 2033 NZGB swap spreads are near their narrowest levels over the past 9 months.

Trade Recommendation: Receive August RBNZ OIS

Nick Smyth -
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The market prices 2.5bps into the August RBNZ meeting (10% implied probability) and 11bps into the November RBNZ meeting (44% implied probability). Our base case, along with that of the RBNZ, is that the OCR will be on hold this year. We see the next move being a hike, in February 2019.

Markets Outlook

Filling Holes

BNZ Research -
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The near-stalling in March quarter retail volume growth flattens one of the few backbones we expected for Q1 GDP growth. However, we believe the economy will expand solidly in Q2, and will accelerate over the second half of 2018. This is partly on the back of the fiscal stimulus that is scheduled to hit household wallets from 1 July.

Budget Will Have an Accounting Focus (More’s The Pity)

BNZ Research Team -
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Appeasing the accountants is one thing. But any Budget should also be judged on the economic and social good it is doing. It’s usually easy for a government to spend money (especially when the books are in great shape, as New Zealand’s are). The question is whether the money is being spent in the most efficient and equitable manner. This is where the real debate should be, not simply on the accounting targets being met.

Either Or

BNZ Research Team -
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We are not anticipating any material changes in Thursday’s Monetary Policy Statement (MPS). If there are any, they are likely to be more of style than substance, given the new Governor and Policy Targets Agreement (PTA). Nonetheless, this could cause markets to read more into any nuances, and change of language, than is warranted. This may or may not be aggravated by what the new Governor, Adrian Orr, says.

All Eyes On The Labour Market

BNZ Research Team -

Wednesday’s Q1 labour market reports will garner the market’s attention. Perhaps even more so than usual because an employment objective is now part of the RBNZ’s Policy Targets Agreement. This raises the risk of market over-reaction to minor deviations in often volatile data. A broad set of indicators say the labour market was healthy in Q1. But ebbing confidence raises questions around the degree of strength ahead.

Five Million People

BNZ Research Team -
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Wednesday’s ANZAC day holiday splits into two what is a generally quiet data week. While there doesn’t look to be much to move markets, there are a couple of releases that could prove important in the bigger picture. Tomorrow’s migration numbers for March fits this category, as NZ’s population heads toward five million. Friday’s trade and consumer confidence figures are also worth a look.

BNZ Markets Today

Nick Smyth -
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US equities increased again overnight after more positive
earnings reports from US corporates, and as US-China
trade tensions moved off the headlines for a day. The
USD is mixed, with the NZD again being one of the
underperformers. Meanwhile, the US yield curve flattened
again, drawing a response from incoming NY Fed
President John Williams.

Downside Risk to CPI

BNZ Research -
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Recent data continue to provide us with hope that the economy can continue to grow around its potential for some time to come. Importantly, the expansion should not be cut off at the knees by the central bank any time soon as CPI inflation remains at the bottom of the RBNZ’s target range. Thursday’s Q1 CPI data should confirm this. Moreover, there is a very real chance that the RBNZ (and maybe even the market) will again be surprised to the downside when the latest price data is released.

QSBO Stronger Than Its Seams

BNZ Research Team -
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Overall, we anticipate a hanging-in-there type of result for tomorrow’s QSBO, rather than anything strong as an indicator of economic expansion. But this is not to lose sight of the NZIER survey’s clearest message – that the economy is getting extremely stretched.

Short and Sweet

BNZ Research Team -
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We are keeping a close eye on labour market momentum – along with business investment indicators – given the slump in business confidence. The labour market will certainly be a key interface between a currently buoyant household sector and a less than confident business sector.

Maximum Sustainable Employment (Achieved Already?)

BNZ Research Team -
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The government this morning confirmed a range of changes to the Reserve Bank of New Zealand’s modus operandi. These were hardly any revelation, given the prescriptiveness of the terms of the review process. . If anything, the largely reiterated inflation-related content might be seen as reinforcing a dovish bent on the part of the RBNZ. However, the new words relating to “maximising sustainable employment” might, ironically, highlight why the Bank can’t be too dovish, and might even need to turn hawkish in due course.

RBNZ to Stick Loosely to Its Script

BNZ Research -
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s we’ve been saying for a good many months, the RBNZ will probably not be keen to follow the global tendency, toward less monetary stimulus – at least not soon. If there is a risk around Thursday’s OCR review it is that the Bank comes across a touch dovish, perhaps with reference to the near-term CPI. However, all up, we believe the Bank will affirm a steady-as-she-goes message.

Q4 GDP A Measure of Being Well

BNZ Research -
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Thursday’s Q4 GDP report will be the highlight this week. Not that it’s looking like being a big deal, one way or the other. We estimate a steady quarterly gain of 0.7% (after its 0.6% outcome of Q3). This is what the Reserve Bank expects too, with reference to its February Monetary Policy Statement. A quarterly expansion of 0.7% would set annual growth of 3.1%. While that wouldn’t look especially strong in per capita terms it will probably appear robust to the recent transitions on the political front.

GDP Partials Dominate the Week Ahead

BNZ Research -
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The week ahead will allow us to settle on our pick for Q4, 2017 GDP. At the moment we’ve got 0.5% penciled in for the quarter but the risks are very much skewed to the upside. The Reserve Bank plumped for 0.7% in its February MPS and this is, increasingly, looking like a good bet. But we’ll wait for this week’s partials before formalising our suspicions.

Time to Improve

BNZ Research -
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It’s not just business sentiment that could do with a lift. The activity indicators in the ANZ survey – even though they held up a lot better than general confidence did – were still well below par. Granted, this is not inconsistent with our view of near-term slowness in GDP. However, we will need to see these activity pointers improve by mid-year if we are to retain confidence in our view that GDP growth will pick up the pace as 2018 progresses.

Markets Today

BNZ Markets Today

Jason Wong -
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The NZD finished the week on a good note, rising on all major crosses against a backdrop of little news. UST yields fell steadily, ending the session 7bps lower from the high reached just before the NZ close.

BNZ Markets Today

Jason Wong -
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US bond yields continue to nudge higher, the USD has
been well supported overnight and the NZD is down
slightly on most crosses.

BNZ Markets Today

Jason Wong -
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The NZD is having a much better day after its recent rout, alongside a recovery in other commodity currencies and emerging market currencies. Despite UST yields sustaining yesterday’s upward move, US equities have shown a modest recovery.

BNZ Markets Today

Nick Smyth -
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The big news overnight is that the 10 year Treasury yield has broken above its highs from early 2014, and now sits at 3.08%. The rise in yields has boosted the USD, which reached new highs for this year, and weighed on equities. Amid the strong USD backdrop, the NZD has (again) underperformed and is around 0.6860.

BNZ Markets Today

Nick Smyth -
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US equities have made modest gains overnight, with Trump’s decision to reverse sanctions on China’s ZTE seen as a positive for trade negotiations between the two countries. European bond yields rose after ECB Governing Council member Villeroy implied the ECB was planning on raising rates at some point in 2019. Amid reasonably limited FX market moves, the NZD is the biggest mover overnight, and is back down to 0.6920.

BNZ Markets Today

Nick Smyth -
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Market movements were very subdued to end the week, with no top-tier economic data released. The S&P500 edged out a small gain to end up over 2% on the week, while the USD was slightly weaker. Overnight, Trump announced on Twitter that he had instructed the Commerce Department to reverse its sanctions on China’s ZTE, which the market will likely see as a key concession in the trade negotiations. The NZ Budget will be a focus for the local market this week.

BNZ Markets Today

Nick Smyth -
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Good Morning
US equities moved up to their highest level since mid-April and the USD fell after a slightly lower than expected US core CPI release. US Treasury yields declined slightly but market expectations of Fed tightening haven’t been materially affected. The BoE revised down its inflation forecasts in its Inflation Report and the market has pushed back rate hikes in the UK. The NZD is the worst performing currency the past 24 hours, with the market taking a dovish interpretation of the RBNZ MPS and Governor Orr’s comments afterwards.

BNZMarkets Today

Nick Smyth -
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President Trump announced a short while ago that he was pulling out of the Iran nuclear deal, although oil prices are unchanged on the day, implying the market had largely factored this in. The USD has extended its recent move higher, with Fed Chair Powell reinforcing the message that more rate hikes are coming. The NZD has made a new low for the year, below 0.70, as commodity currencies have underperformed overnight.

BNZ Markets Today

Nick Smyth -
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Oil prices pushed on to a new post-2014 high overnight ahead of President Trump’s decision tomorrow on whether to re-impose sanctions on Iran. Equity markets are also higher, buoyed unsurprisingly by energy stocks. Elsewhere, markets were very quiet, with no major data released and the UK on public holiday.

BNZ Markets Today

Nick Smyth -
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The US payrolls report on Friday was mixed, but the drop in the unemployment rate to 3.9% was enough to push the USD higher again. Equities also moved higher after the payrolls report even amid reports that US-China trade talks remained deadlocked. Emerging markets have come back into the market’s focus as well, with the Argentinean central bank raising its cash rate to 40%, to combat the decline in the peso. The NZD continues to hover around 0.70 ahead of Adrian Orr’s first RBNZ meeting this Thursday.

BNZ Markets Today

Jason Wong -
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In overnight trading the USD is mainly softer, adding to the initial move lower after the FOMC announcement yesterday, while UST yields have nudged a little lower as well. The NZD is modestly higher across the board.

BNZ Markets Today

Jason Wong -
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There have been only modest changes in currencies since this time yesterday, with the USD slightly weaker since this morning’s FOMC Statement. US equities and UST yields are little changed.

BNZ Markets Today

Jason Wong -
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As a new month begins, the stronger USD theme has continued with increases across the board, sending the NZD below 0.70 and big figures broken for other majors. Inflationary pressures see US rates a touch higher, while US equities are lower.

BNZ Markets Today

Jason Wong -
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The NZD has started the week on a soft note in a fairly quiet end to the month.

BNZ Markets Today

Jason Wong -
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On a historic day, market movements were remarkably modest. The USD lost a little ground after its strength earlier in the week, while the only real standout performer was a weaker GBP after growth missed expectations.

BNZ Markets Today

Nick Smyth -
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US equities have moved higher over the past 24 hours, boosted by stronger earnings (Facebook in particular). The EUR fell to a three month low after Draghi said the Governing Council hadn’t discussed monetary policy “per se” at its meeting. The 10 year Treasury yield has drifted back to a little under 3%.

BNZ Markets Today

Nick Smyth -
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The US 10 year Treasury yield finally breached 3% for the first time since the start of 2014. Higher rates have weighed on equities and probably helped the USD, which is stronger across the board once again. The NZD fell to year-to-date lows against the USD.

BNZ Markets Today

Nick Smyth -
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The US 10 year yield came within a whisker of 3% overnight, and remains close to the highs reached at the start of 2014. The higher US rate environment seems to be helping the USD, which strengthened across the board. The NZD fell to its lowest level since mid-January.

BNZ Markets Today

Nick Smyth -
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US Treasury yields rose again on Friday, with the 10 year yield up to 2.96%, its highest since early 2014. Equities fell again, with higher bond yields probably weighing, and the USD strengthened. The NZD is back down near to 0.72. Over the weekend, US Treasury Secretary Mnuchin mentioned he was considering a trip to China and was “cautiously optimistic” a deal could reached; this should help support risk assets to start the week.

BNZ Markets Today

Nick Smyth -
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Commodity prices remain in the spotlight, with oil prices
making a fresh high again overnight, although they have
since eased back. The 10 year US Treasury increased
again, with the yield curve steepening for a change, amid
higher inflation expectations. US equity markets are lower
and the USD stronger.

BNZ Markets Today

Nick Smyth -
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Most market moves have been reasonably modest
overnight, although US equities and bond yields have
pushed a little higher. Oil prices rose to a new, post-2014
high. The CAD and GBP have fallen after a dovish Bank of
Canada statement and lower than expected CPI
respectively. The NZD has again been one of the
underperformers in FX markets ahead of CPI today, and
NZD/AUD has eased back towards 0.94.

BNZ Markets Today

Nick Smyth -
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US equities have moved higher overnight on some easing in geopolitical risks and ahead of more corporate earnings reports later this week. The US dollar is broadly weaker after President Trump accused China and Russia of “playing the currency devaluation game”. The NZD has been one of the laggards, and is unchanged from this time yesterday.

BNZ Markets Today

Nick Smyth -
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It was a quiet end to last week, with most markets seeing modest moves. US stocks fell slightly but were up on the week, while the US yield curve continued to grind flatter. Oil prices made a new high.

BNZ Markets Today

Jason Wong -
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Market movements have been modest although there is
still a notable grind up in the NZD, supported by a better
risk backdrop.

BNZ Markets Today

Jason Wong -
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Market price action has been fairly minimal across the board. Rising Middle East tensions see a mild risk-off tone and oil prices continuing to rally, while the NZD is down slightly.

BNZ Markets Today

Jason Wong -
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Commodity currencies have outperformed and equity
markets have recovered since President Xi’s speech
yesterday allayed fears of a US-China trade war. Other
currencies and bond markets have seen only modest price
movements.

BNZ Markets Today

Jason Wong -
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Market sentiment began the week on a positive note, seeing a rebound in US equities, a nudge higher in UST yields and the NZD outperform, while the USD is weaker across the board.

BNZ Markets Today

Jason Wong -
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The US-China verbal war on trade continued on Friday, driving down US equities by more than 2% with only a little spill-over for dollar-bloc currencies and UST yields.

BNZ Markets Today

Jason Wong -
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The USD is broadly stronger as markets take a more
optimistic view on US-China trade tensions, while US rates
drift higher against a backdrop of a further recovery in
equities.

BNZ Markets Today

Jason Wong -
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The US-China trade war has heated up but the market is taking this in its stride. Initial market movements on headlines haven’t been sustained. Net FX movements have been minimal, apart from the

BNZ Markets Today

Jason Wong -
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On a slow news day, US equities are modestly higher
after the chunky fall yesterday. Commodity currencies
have outperformed and UST yields are higher on the
improved market sentiment.

BNZ Markets Today

Jason Wong -
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Most markets were closed for the Easter Monday holiday but unfortunately the US market is open and stocks have been pummelled as the new quarter begins. This has seen the NZD soften a little, while JPY has outperformed.

BNZ Markets Today

Nick Smyth -
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The S&P500 has stabilized overnight after sustaining heavy falls late in the New York session yesterday. The 10 year Treasury yield broke below its recent trading range yesterday and the US yield curve flattened its narrowest level since 2007. The USD is broadly stronger but remains within recent ranges.

BNZ Markets Today

Nick Smyth -
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Market moves were reasonably modest overnight, with no
top tier economic data being released and not much in the
way of headlines around US-China trade negotiations. US
bond yields fell, possibly related to month-end buying
while US equities also gave back some of their gains from
yesterday.

BNZ Markets Today

Nick Smyth -
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With no major economic data released overnight, headlines around US-China trade tensions remained the dominant market driver. After falling sharply last week, US stocks bounced back overnight on hopes that the two sides could negotiate an agreement and avoid the use of tariffs. The USD is weaker once again and at one-month lows. The NZD/AUD made an eight month high, as it broke above 0.94.

BNZ Markets Today

Nick Smyth -

US stocks fell sharply again on Friday as concerns mounted about an escalation in US-China trade tensions. The USD was broadly weaker, with the NZD doing surprisingly well amidst the risk-off backdrop.

BNZ Markets Today

Jason Wong -
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In overnight trading, the USD has pared back some of its
losses seen since yesterday before and after the FOMC’s
statement. UST yields have fallen further as US equity
markets show another chunky fall

BNZ Markets Today

Jason Wong -
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The USD took on a softer tone ahead of the FOMC statement and has made further losses since, while UST yields have nudged higher.

BNZ Markets Today

Jason Wong -
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Another rough day for equity markets has helped support
the bond market, while in the currency market, GBP leads
the way while the AUD has underperformed.

BNZ Markets Today

Jason Wong -
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The NZD and AUD ended last week on a soft note, showing some clear underperformance on a day when other market movements were modest.

BNZ Markets Today

Nick Smyth -
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The USD is broadly higher overnight with Trump’s new economic
advisor Larry Kudlow perhaps helping sentiment by declaring he
wanted to see the currency “a wee bit stronger”. The NZD is
back down to 0.7270. US bond yields have nudged up while
equities are near unchanged.

BNZ Markets Today

Nick Smyth -
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US equity and bond yields have fallen modestly overnight after a disappointing US retail sales release and as the spectre of more trade tariffs hangs over the market. FX moves have again been reasonably contained, with the NZD holding at around 0.7330.

BNZ Markets Today

Nick Smyth -
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Bond yields are slightly lower overnight after US core CPI
matched market expectations, allaying some fears of more
aggressive Federal Reserve tightening. US equities have
fallen slightly with President Trump’s decision to fire
Secretary of State Rex Tillerson weighing on sentiment. The
USD is weaker overnight and the NZD is back up to 0.7345, a
two-week high.

BNZ Markets Today

Nick Smyth -
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Markets were very quiet overnight, with no major economic data released. Market movements across bonds, equities and currencies were very modest. The focus turns to the release of US CPI tonight.

BNZ Markets Today

Jason Wong -
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US stocks surged higher on Friday as the non-farm payrolls report showed a large gain in employment but some moderation in US wage growth. The US dollar was mixed while UST yields rose modestly. The NZD rose slightly.

BNZ Markets Today

Jason Wong -
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The USD has made some broadly-based gains as the US
policy on steel and aluminium tariffs looks to be watered
down, while EUR has underperformed following the ECB
announcement and for the same reason global bond rates
are lower.

BNZ Markets Today

Jason Wong -
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The risk-off mood that developed during the local session yesterday, as US trade policy remained in the spotlight, has been sustained overnight, seeing the NZD modestly weaker, alongside weaker US equities.

BNZ Markets Today

Jason Wong -
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The NZD has outperformed following some positive
newsflow on North/South Korea relations, taking Trump’s
tariff proposals off the front pages. Equity and bond
markets only show modest changes.

BNZ Markets Today

Jason Wong -
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Equity markets are higher and US 10-year rates have nudged up since the NZ close. Currency movements have been modest, with CAD a notable underperformer.

BNZ Markets Today

Nick Smyth -
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US equities have fallen again overnight, and this has
caused US Treasury yields to decline slightly. President
Trump announced he was going to impose tariffs on steel
and aluminium imports, overshadowing a very strong ISM
Manufacturing Survey. Meanwhile, there was a slightly
more dovish tone to Fed Chair Powell’s testimony to the
Senate. The USD is mixed overnight, with the NZD one of
the stronger performing currencies.

BNZ Markets Today

Nick Smyth -
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US equity markets have consolidated overnight after falling in response to Fed Chair Powell’s hawkish comments yesterday. The 10 US Treasury yield has fallen back from the highs reached yesterday, with the yield curve flattening. The USD is a little stronger overnight, while the GBP has fallen as tensions mount between the EU and UK over Brexit.

BNZ Markets Today

Nick Smyth -

US Treasury yields moved higher overnight after Fed Chair
Powell alluded to the potential for the Fed ‘dots’ to rise at
the upcoming March meeting. US equity markets
declined modestly and the USD strengthened. The NZD
was one of the worst performing currencies over the past
24 hours.

BNZ Markets Today

Nick Smyth -
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Global equity indices moved higher again overnight while bond yields fell slightly ahead of Fed Chair Powell’s testimony to Congress. There was no major economic data overnight.

BNZ Markets Today

Nick Smyth -
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US equities ended the week higher while US bond yields fell and the yield curve flattened. Ahead of new Fed Chair Powell’s testimony this week, the Fed’s semi-annual Monetary Policy Report noted that US wage growth was “moderate, and didn’t signal any heightened concern about inflation risks. The NZD underperformed on Friday and sits just below 0.73.

BNZ Markets Today

Nick Smyth -
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US equities are higher, bond yields a bit lower, and the US
dollar weaker as markets have retraced the moves seen
after the FOMC minutes yesterday (which were initially
interpreted as hawkish). The ECB minutes suggested that
the central bank’s forward guidance will change in the
upcoming meetings. The NZD is unchanged from this
time yesterday.

BNZ Markets Today

Nick Smyth -
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US stocks moved higher overnight but, otherwise, market moves were reasonably subdued as we wait the release of the FOMC minutes in an hour or so. The US dollar is again a bit stronger against most of the major currencies, with the NZD sitting around 0.7345. The GBP has been buffeted by more Brexit talk, a mixed labour market report, and some hawkish comments from the BoE.

NZ At A Glance

NZ At A Glance

Stephen Toplis -
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Currently the NZ economy is in an enviable state. Growth is robust, employment prospects are good, the housing market is stable, global demand is supportive, we’ve got fiscal surpluses and interest rates are low. From here, though, things get a little more difficult and we expect economic growth to moderate despite significant fiscal stimulus. Nonetheless, barring a major asset price correction, induced by global monetary tightening, the prospects remain relatively sound for the medium term.

Rural Wrap

Deliberating Dairy

Doug Steel -
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Fonterra has lifted its milk price forecast for 2018/19 to $6.55 and so have we. This follows from generally higher international prices and a relatively stable NZD during 2018. We expect global dairy prices to drift lower in 2018, but downside risks have moderated with a higher Euro, higher oil prices, and robust dairy demand. Reflecting this, we lift our 2018/19 milk price forecast to $6.10. But with wide error bounds around any season-ahead milk price forecast, we look at some alternative scenarios.

Not All Bad

Doug Steel -
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Farmer confidence has fallen sharply over recent months. We take a look at what might be behind the confidence slide. It’s interesting that this time around it is not the exchange rate or product prices that are weighing most on farmer’s minds.