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 Corporate FX Update

Jason Wong -

The emergence and spreading of COVID-19 is negative for the NZ economy and NZD. Once risks of the viral epidemic become well-contained the NZD can recover, but until then we remain cautious about the outlook.

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

NZD and AUD under pressure in January

Jason Wong -

• The NZD and AUD were whacked by the spreading coronavirus emanating from China.
• Much weaker risk appetite saw safe-haven currencies outperform.
• Fear of a pandemic saw a chunky fall in global and domestic rates.

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

NZD/AUD: Near The Top Of The Range?

Jason Wong -

The cross is above our short-term and long term valuation estimates near 0.94 and 0.91 respectively.

We see the cross rate as being near the top of its historical trading range. While there’s a chance that a fresh high is made in the near-term – the coronavirus being a new factor to consider – through the year we see risks more skewed towards the downside.

Our forecasts are anchored at 0.94-0.96 through 2020. It would be prudent for importers to take cover at 0.96 and higher, while exporters can afford to wait for more attractive levels to add to cover.

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

NZD Corporate FX Update

Jason Wong -

Our NZD projections are consistent with the low volatility environment continuing. Near-term consolidation gives way to an upward bias later in the year.

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

Six questions for the NZD in 2020

Jason Wong -

With a new year underway, we try to answer some key questions which will determine the path of the NZD this year. They are:
- Will a better global economy drive the NZD?
- Have NZ’s commodity prices or terms of trade peaked?
- Will the NZD continue to track CNY?
- Will interest rates drive the NZD?
- Will NZD volatility remain low?
- Will the USD finally weaken materially?

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

NZD: The upswing begins?

Jason Wong -

Six weeks ago we became more positive on the NZD and questioned whether a sustained recovery was imminent (see “NZD: The makings of a recovery?”, 22 October 2019). We’ve been patient, and last night the NZD broke higher, out of the 0.62-0.6450 trading range evident since early August. Is this the beginning of the awaited upswing?

Economy Watch

Business Survey Resilience Mainly Shows Its Prematurity

Craig Ebert -

The semi-resilience seen in this afternoon’s ANZ business outlook survey confirmed it was too early for it to gauge impacts from the Covid-19 virus. Having said this, with its readings from agriculture now so weak, at least the local drought appears well reflected. It’s also worth noting that today’s survey had a strengthened tone around construction, and a hardy tone around inflation.

Service with a smile

Doug Steel -

New Zealand’s services sector started the year on a pleasing note, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for January was 57.1, which was 5 points up from December (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). The January result was also the highest level of expansion since March 2018, and clear above the long term average of 54.4 for the survey.

BusinessNZ chief executive Kirk Hope said that the pick-up in activity for the first month of 2020 was welcome after a lacklustre 2019.

“The key drivers of the January result was a combination of new orders (62.8) getting back over the 60-point mark, as well as activity/sales (57.0) lifting to its highest level since January 2019. Supplier deliveries (56.5) also saw its strongest result since June 2017.”

“Any continuation of January’s result in the months ahead will depend on new business opportunities and consistent sales to drive activity further.”

BNZ Senior Economist Doug Steel said that “for now, January’s glowing PSI report fits with the rather upbeat view of the economy expressed by the Reserve Bank last week. In the least, it helps offset a still soft looking PMI. Regardless, the near term outlook heavily depends on how much – and for how long – disruption occurs as a result of local weather conditions and COVID-19.”

Sluggish start to the year

Craig Ebert -

New Zealand’s manufacturing sector experienced a second consecutive month in contraction, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for January was 49.6 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). While this was up 0.4 points from December, the sector remains in contraction.

BusinessNZ’s executive director for manufacturing Catherine Beard said that the mixed results for 2019 have continued to spill over into 2020.

“Looking at the key sub-index values, new orders (50.6) is still only just managing to keep its head above water, while production (49.9) has now been in contraction for three consecutive months. Employment (46.9) also took a hit to reach its lowest mark since July 2019.”

“The proportion of negative comments in January (52.5%) picked up from December (44.9%). In terms of the comments made, there were still seasonal effects at play, most notably the Xmas/holiday break. However, there was also some discussion around uncertainty due to the coronavirus.”

BNZ Senior Economist, Craig Ebert said that “in the context of the latest global ructions - this time related to the COVID-19 virus – January’s PMI could arguably be read as a relatively decent outcome. At the same time, it is surely too early for the PMI to capture the economic consequences of the virus”.

BNZ/SEEK Employment Report

Craig Ebert -

Job advertising posted a big bounce in January at 9.2%, seasonally adjusted, which represents a very optimistic print. The jump went a long way to restoring positivity, after the wobbly end to 2019. Indicative of this, the trend measure on job advertising expanded 0.8% in January, while annual growth returned to the black with +1.9%, after a few months of running slightly negative.

RBNZ Trashes Easing Bias

Stephen Toplis -

We see no reason to change our view that the cash rate is on hold until the first quarter of 2022. Risks are two way. In the event the coronavirus gets really nasty, in a GDP growth sense, it is reasonable to assume the RBNZ would cut the cash rate in May or August. On the flip side, if the coronavirus’ impacts are short-lived and our assumed fiscal easing is announced then a rate increase in the first quarter of next year looks increasingly plausible and might be accompanied by a more aggressive rate track thereafter than we have currently assumed.

Full employment reigns

Stephen Toplis -

Today’s data reinforce our view that New Zealand’s labour market is unequivocally tight and, perhaps more importantly, is, with the help of government policy, generating wage inflation. Put these two things together and it’s hard to conclude anything other than we are at or near full employment. This being the case, the labour data provide the RBNZ with no excuse to even contemplate lowering interest rates. To the contrary, in and of itself, these figures suggest the RBNZ should be seriously considering raising rates.

CPI Inflation Firming Up

Craig Ebert -

Overall, there was plenty in this morning’s CPI report to keep RBNZ/OCR downside ruminations at bay for the foreseeable future, even stir thoughts of eventual OCR upside. Having said this, we are also conscious of things that could yet challenge GDP growth, thus undermining the case for strengthening (core) inflation.

No Xmas cheer

BNZ-BusinessNZ -

New Zealand’s manufacturing sector fell back into contraction for the last
month of 2019, according to the latest BNZ - BusinessNZ Performance of
Manufacturing Index (PMI).

NZIER QSBO

Stephen Toplis -

From our perspective, the QSBO will provide no pressure either way for the RBNZ to awaken from its slumber. To us it delivers further evidence that the Bank can sit on its hands for a long time yet. For now the economy seems uncannily stable and boring.

Which Santa Delivered GDP Gift?

Stephen Toplis -

New Zealand’s economy grew a very solid 0.7% in the third quarter of 2019. More importantly, GDP proved to be yet another indicator suggesting the economy has, for now at least, successfully negotiated an environment that threatened to push the country into recession.

Dynamics More Interesting Than Deficit

Doug Steel -

New Zealand’s current account deficit came in at 3.3% of GDP for the year to September 2019. This was marginally lower than market (and our) expectations of 3.4%, although this seemed as much to do with a small downward revision to history as anything fundamental.

Pessimism Wilting

Stephen Toplis -

It would be a stretch to suggest that businesses in New Zealand are optimistic about their lot but it is fair to say they are getting less pessimistic by the day. This being the case, the need for extra “help” from either the fiscal or monetary authorities can be considered to be in decline.

2 Steps Back

Craig Ebert -

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

Ebbs and flows

Doug Steel -

New Zealand’s manufacturing sector experienced slower expansion levels in November, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

Q3 GDP: Steadying Growth, From a Much Stronger Base

Craig Ebert -

What if we were to say next Thursday’s September quarter GDP will print near 2% higher than many people figure on? That’s where our analysis is getting to, as substantial upward revisions to historical GDP data also come to pass. Sure, this will still leave a picture of a slowing economy, since a point of (increased) strength back in 2017/18. However, there is also a sense that the slowdown is now basing. Reflective of this, we anticipate a 0.5% (2.3% y/y) expansion in Q3 GDP.

BNZ/SEEK Employment Report

Craig Ebert -

September’s big jump in job advertising has been followed by softer months that have essentially given up those gains, with November’s print falling a seasonally adjusted 0.8%, after easing back 0.3% in October. This has all but flattened off the trend measure. This advanced just 0.1% in November. Flatness was also indicated by its annual rate of increase subsiding to -1.0%, while the seasonally adjusted index was down 0.8% compared to November 2018.

Government delivers infrastructure boost

Stephen Toplis -

The Government reports an estimated fiscal surplus of 2.4% for the year ended June 2019, substantially greater than the 1.2% estimated at Budget time.
The budget balance will move into deficit this financial year (0.3% of GDP). It is forecast to return to surplus (0.5% of GDP) in the year to June 2022. It rises to 1.5% of GDP by June 2024.
Net core crown debt will rise from 19.0% of GDP to 21.5% in June 2022. It is then forecast to fall to 19.6% of GDP by June 2024.
Treasury forecasts GDP growth of 2.2% for the year ended June 2020. Growth of 2.8%, 2.7%, 2.5% and 2.4% are then expected in the years ended June 2021, 2022, 2023 and 2024 respectively.
The bond tender programme for the three years ended June 2022 is unchanged. An extra $2.0 billion will be issued in 2022/23 raising that year’s offering to $8.0 billion. In 2023/24 the bond tender programme will be $6.0 billion.

RBNZ Capital Review Not So Scary

Stephen Toplis -

The “best” news from today’s announcement is that the uncertainty around bank capital requirements is now largely behind us. Knowing the lie of the land – even if you don’t like the look of it – is usually so much better than not knowing it. And, in this case, the certainty is significantly better than once feared. At the margin, this should lift confidence reducing our downside fears for growth and the probability of further interest rate reductions.

Financial Markets Wrap

Risk assets outperform in December

Jason Wong -

Very low currency volatility in November

Jason Wong -

• Higher risk appetite as markets await US-China trade deal news
• NZD/USD flat with little volatility but NZD crosses stronger
• Global rates push higher

Interest Rate Strategy

BNZ Interest Rate RV Pack

Nick Smyth -

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

Outlook for Borrowers - Post-February MPS

Nick Smyth -

The RBNZ kept the OCR unchanged, at 1%, at the February MPS, as universally expected by economists. The lead-up to the meeting was dominated by the emergence of the coronavirus outbreak in China which, from an economic perspective, has resulted in travel disruption and extended production shutdowns in China. NZ is exposed to China through tourism, education and commodity exports and there will be at least a short-term impact on NZ growth.

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

NZ BEIs – reasons to be positive as we look ahead in 2020

Nick Smyth -

2019 should have been an especially challenging year for NZ breakevens (BEIs). The US-China trade war flared up and a broad-based global growth slowdown took hold. Government bond yields experienced a massive rally. BEIs fell to levels well below central bank inflation targets in most markets as market participants started to question the effectiveness of monetary policy in lifting inflation.

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

Safe As Houses: What does the increase to Housing NZ Ltd issuance mean?

Nick Smyth -

Government increases Kāinga Ora borrowing protocol
Earlier this week, the government announced an increase to the borrowing protocol (effectively a debt limit) for Kāinga Ora – Homes and Communities. Kāinga Ora is responsible for housing and urban development, including the provision of state housing, which is a policy priority for the government. Housing New Zealand Limited (hereafter ‘Housing’) is a subsidiary of Kāinga Ora and funds under its own name in debt capital markets. The increase to the debt limit will allow Housing to fund greater investment in social housing.

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

The possibility of negative rates in NZ – an explainer

Nick Smyth -

The RBNZ sets the Official Cash Rate (OCR). This is an overnight interest rate that banks earn on cash balances they hold with the RBNZ. The OCR is currently 1% - an historic low.

Bond market implications from HYEFU – fiscal stimulus inbound?

Nick Smyth -

The Half-Year Economic and Fiscal Update (HYEFU) is next Wednesday, 11 December. Treasury will update its forecasts and economic assumptions and New Zealand Debt Management (NZDM) will provide an update on the NZGB bond programme. At the Budget in May, the bond programme was set at $10b for this fiscal year. Net issuance of nominal NZGBs was set to be positive in the current fiscal year for the first time since FY 2015/16.

Markets Outlook

The Sniff Test Begins in Earnest

BNZ Research -

Thursday’s ANZ business survey will be the first local economic report to indicate implications of the Covid-19 virus, as well as the domestic drought. There will be no prizes for guessing which way it moves. The saving grace is that the survey showed a bit of fight-back at last release, back in December. So, it has that buffer to draw on.

Recession: Plausible Not Probable, yet!

BNZ Research -

We reiterate that a recession is not our central forecast but it is a very real risk and we can’t stress enough that the drought may well, eventually, prove to be as important as the coronavirus. And we are concerned that it is being largely overlooked in much commentary.

Firmity in the Face of Infirmity

BNZ Research -

At its Monetary Policy Statement (MPS) this Wednesday, the Reserve Bank will obviously have to acknowledge the impacts of the coronavirus, as well as increasingly adverse weather locally. But the Bank also needs to take on board the swathe of economic news since its November MPS which has tended to the positive/potentially-inflationary side of the ledger.

RBNZ MPS Preview: Viral Concerns

BNZ Research -

We expect the RBNZ to deliver a largely repeat performance of its November Monetary Policy Statement when it delivers its February version on the 12th. While the impact of the coronavirus may well be dominating market thoughts at the moment, we believe it is too early for this to be the exclusive focus of the RBNZ. However, it will have an impact and, had it not been for the arrival of this virus, we would now have been suggesting a more hawkish tilt creeping into the Bank’s rhetoric.

Exports Challenges in Perspective

BNZ Research -

It’s wise to keep your GDP expectations up to the minute, when New Zealand’s two biggest export industries are suddenly encountering headwinds. Such is the case now. In the case of the tourism sector, it is obviously facing challenges around the coronavirus. Local dairy output, meanwhile, is being tested by increasingly dry soil conditions. These issues pose downside risks to our already tepid-looking GDP growth expectations for the first half of 2020.

Inflation: Testing, Testing, One Two Three

BNZ Research -

Annual CPI inflation in New Zealand looks to be closing in on the 2.0% mid-point of the Reserve Bank’s target band. We believe Friday’s Q4 CPI will get it up to 1.8%, from 1.5% in Q3 (en route to 2.1% in Q1 2020). This is based on a quarterly increase of 0.4%, in line with market expectations.

This is higher than the RBNZ expected in its November MPS, namely a quarterly increase of 0.2% and 1.6% y/y.

2020: Limited Upside

BNZ Research -

Our base case for 2020 is that the NZ economy continues to expand close to a trend-like pace, while financial markets broadly hang together. This should keep the RBNZ firmly on hold at a record-low 1.0% cash rate. With this, the exchange rate could reflect relatively more of the gyration in the marginal economic news. While we are conscious of the many things that could trip the NZ economy up this year, we also think that upside news needs to be decent part of the scenario analysis now. Upside potential for the New Zealand economy itself, however, would appear to be limited.

Q3 GDP 2% Higher than Anticipated?

BNZ Research -

If we are right with our 0.5% call on Q3 GDP growth, it will be stronger than the 0.3% increase the RBNZ had in its November Monetary Policy Statement. This will add to the sense the economy is holding up, when many were getting nervous on it. Revisions to GDP – also integral to Thursday’s national accounts – will probably elaborate on the impression the economy has been doing better than generally appreciated. Indeed, these could translate into a level of real GDP 1-2% higher than currently estimated.

How “Significant” Fiscal Stimulus?

BNZ Research -

This week’s smattering of economic data will be overshadowed by the government’s Half-year Economic and Fiscal Update (HYEFU), due Wednesday (1:00pm). This will reveal what Finance Minister, Grant Robertson, meant by a “significant” fiscal stimulus. We suspect it’s principally about capital expenditure (leaving options related to households until next year’s election Budget).

High Noon For Bank Capital

BNZ Research -

There is market chatter that the Reserve Bank, having completed its consultation process in full, might take a smidge off the originally proposed capital target percentages. Also, that it might extend the transition period beyond the five years initially proposed. Overall, however, the bank-capital policy will surely mean for a substantial change from what we have. This will have, along with purported benefits, costs, which will have to show up somewhere, for someone. And not just in the price of credit but more directly in its volume of supply.

Markets Today

BNZ Markets Today

Jason Wong -

The market remains focused on the deteriorating news of the spread of COVID-19, seeing further large falls in global equities and US Treasury rates lurching down to fresh record lows. The USD is under a little pressure, which has prevented further falls in the NZD and AUD, while EUR continues with its recovery. GBP is the weakest of the majors as focus turns to UK-EU trade negotiations.

BNZ Markets Today

Jason Wong -

Risk sentiment is slightly better this morning, with US equities recovering some of the chunky fall seen over the past few sessions, but the bond market remains cautious, with the US 10-year Treasury rate not that much higher from the record low set yesterday morning and down a touch since the NZ close. The AUD has been particularly weak, dragging down the NZD below 0.63.

BNZ Markets Today

Jason Wong -

We’ve seen another risk-off session overnight, with lower global equity markets and lower rates, while JPY has been the best performing currency. The NZD and AUD haven’t showed much movement, while GBP has performed well despite obvious tensions between the UK and EU ahead of formal trade talks.

BNZ Markets Today

Jason Wong -

Risk appetite has slumped as COVID-19 spreads across the world, further threatening the global economic outlook. Global equity markets have showed big falls in the order of 3-4% for some, commodity prices are lower and global rates have rallied hard, with the 10-year Treasury rate down over 11bps. Relatively speaking, currency markets have been well-behaved. After a brief absence last week, JPY has returned as the pre-eminent safe-haven currency, while movements in the NZD and AUD have been modest.

BNZ Markets Today

Jason Wong -

News that COVID-19 was spreading globally and weak US PMI data drove US equities down more than 1%, drove the US 30-year Treasury rate to a record low, and knocked the USD off its perch as it showed broadly based weakness. This saw the NZD recover almost half a cent off its year-to-date low.

BNZ Markets Today

Nick Smyth -

Concerns about the spread of COVID-19 have ratcheted higher over the past 24 hours, with equities, bond yields and several Asian and emerging market currencies falling sharply. The USD has continued to strengthen. The AUD hit an 11-year low following a disappointing employment report and further weakness in Asian currencies while the NZD is trading down at around 0.6335.

BNZ Markets Today

Nick Smyth -

Markets are back trading with a positive tone overnight, with equities bouncing back strongly from Apple’s revenue warning. The USD has continued to appreciate, with the BBDXY making a four-month high. The JPY weakened sharply overnight amidst the risk-on market sentiment and growing fears of recession in Japan. The NZD made a fresh YTD low.

BNZ Markets Today

Nick Smyth -

Markets have traded in a risk-off fashion over the past 24 hours, with equity markets and government bond yields falling. Most of the moves happened during yesterday’s Asian trading session following Apple’s announcement that it did not expect to meet its revenue guidance of the current quarter. The NZD has underperformed amidst the risk-off backdrop and trades below 0.64 this morning.

BNZ Markets Today

Nick Smyth -

Markets have been very quiet overnight with the US shut for Presidents Day. Chinese stimulus measures have helped market sentiment to start the week. The NZD is unchanged, at around 0.6640.

BNZ Markets Today

Nick Smyth -

There wasn’t much movement in either equity or currency markets on Friday night while global bond yields fell after a softer US retail sales release. Yesterday, China reported a fall in the number of new COVID-19 cases for the third consecutive day, which should provide a bid to risk assets to start the week. However, trading activity is likely to be lower than usual with the US out for Presidents Day.

BNZ Markets Today

Jason Wong -

Markets have adopted a more cautious tone after the spike up in the COVID-19 coronavirus cases reported in China. US equities are flat, while global rates have ticked lower – apart from the UK where rates and GBP are much higher following some political fallout that might see an easier fiscal stance adopted. EUR continues to probe fresh lows, while the NZD and AUD are also on the soft side of the ledger

BNZ Markets Today

Jason Wong -

The NZD has held onto its gains made post the RBNZ MPS, but not made any further progress overnight, even with a backdrop of further improvement in risk sentiment. The other commodity currencies have seen the best gains overnight, while safe-havens underperformed. US equities have powered on to a fresh high while US rates are slightly higher.

BNZ Markets Today

Jason Wong -

Risk sentiment is slightly positive, as the market becomes less concerned about the coronavirus outbreak. Global equity markets are higher, rates are slightly higher, the AUD and NZD have lifted off yesterday’s lows and safe-haven currencies have underperformed.

BNZ Markets Today

Jason Wong -

It has been a fairly quiet start to the week, with a lack of fresh news. US equities have begun the week on a positive note but the rates market is taking a more cautious tone about the coronavirus outbreak and the US 10-year Treasury rate is down 4bps to 1.55%. Currency movements have been modest but the NZD and EUR have been on the softer side of the ledger.

BNZ Markets Today

Jason Wong -

Market focus remained on the deadly coronavirus, seeing global equities ending the week on a softer note, and downside pressure on US Treasury yields returning, despite a solid employment report. The NZD and AUD fell to fresh lows for the year, the latter even breaking down through last year’s low.

BNZ Markets Today

Jason Wong -

Locals will return to their desk after the Waitangi Day holiday to see US equities at a fresh record high and global rates higher – and therefore upside pressure on the domestic rates market at the open this morning – and the NZD down slightly against the USD and AUD.

BNZ Markets Today

Jason Wong -

The market seems to have less concern about the impact and longevity of the spreading coronavirus, with a strong recovery in global equities and global rates. Safe-haven currencies have underperformed, the NZD has ticked higher, while the AUD was well supported after the RBA’s on-hold policy decision.

BNZ Markets Today

Jason Wong -

The coronavirus remains the key focus for the market. US equities are trying to stage a recovery and US rates are slightly higher, a change from the prevailing downward trend, although the market still feels skittish. The NZD and AUD are flat, while GBP has taken a blow on cliff-edge trade deal concerns.

BNZ Markets Today

Jason Wong -

On Friday, the spreading coronavirus remained forefront of mind for the market, seeing weaker equity markets, lower global rates and safe-haven currencies outperforming. The NZD and AUD continued to track lower.

BNZ Markets Today

Nick Smyth -

Market sentiment has deteriorated overnight amidst growing concerns about the economic fall-out from the coronavirus. Equities, bond yields and commodities have all fallen in unison. The NZD has fallen below 0.65 amidst broad-based weakness in commodity and Asian currencies.

BNZ Markets Today

Nick Smyth -

Equity markets have consolidated overnight after rebounding sharply yesterday. But market sentiment remains cautious amidst concern about the potential economic fallout from the coronavirus, with global rates and commodity currencies drifting lower over the past 24 hours. The NZD has fallen to 0.6520, its lowest level in almost two-months. The FOMC meeting takes place at 8am NZT.

BNZ Markets Today

Jason Wong -

A sense of calm has returned to markets after the coronavirus-driven turmoil of recent days. US equities and Treasury yields are higher. While most currency movements have been modest, the NZD has underperformed a little, alongside GBP.

BNZ Markets Today

Jason Wong -

The spreading coronavirus has dominated markets with a significant risk-off move evident. Equity markets have fallen, some more than 2%, while global rates are much lower. Currency movements have been well contained apart from notable falls in the AUD, NZD, CNY and Scandi currencies.

BNZ Markets Today

Jason Wong -

US equities ended the week on a soft note and global rates were lower, with traders worried about the escalation of the deadly Wuhan coronavirus. Currency movements remained well contained, with JPY slightly outperforming alongside the USD on Friday night.

BNZ Markets Today

Doug Steel -

Risk off sentiment has percolated through markets overnight. Equities and bond yields are lower, while JPY has lifted. Commodity prices are generally lower, although safe-haven gold is an exception.

BNZ Markets Today

Jason Wong -

Equity and bond markets haven’t shown much signs of life overnight and the same goes for most currencies, apart from notable strength in GBP on stronger data and a weaker CAD on a dovish Bank of Canada.

BNZ Markets Today

Nick Smyth -

Reports of further cases of coronavirus have dominated headlines over the past 24 hours. Asian equity markets and global rates fell but US equities have rebounded over the past few hours and are now up on the day. Currency moves have been muted.

BNZ Markets Today

Jason Wong -

There is a dearth of news out there, with the Martin Luther King holiday in the US, while the Wellington anniversary holiday yesterday made for an uneventful local session. This is reflected in market pricing, with little change in US equity and Treasury futures and a lack of currency movements.

BNZ Markets Today

Nick Smyth -

Markets ended last week on a positive note, with equities making new highs and bond yields nudging higher. The GBP was the worst performing currency as markets scaled up BoE easing expectations after a dire retail sales report. A stronger USD on Friday helped push the NZD down to 0.6615. The next 24 hours should be very quiet, with Wellington Anniversary Day taking place and the US closed for Martin Luther King Day tonight.

BNZ Markets Today

Nick Smyth -

It has been more of the same overnight, with equity markets making new highs but subdued moves in bond yields and currencies. Better-than-expected US data has supported the USD, but the NZD has outperformed and is up on the day.

BNZ Markets Today

Nick Smyth -

US equities continued to power ahead to fresh record highs overnight with the US and China finally signing the long-awaited Phase-One trade deal. In contrast, global rates have fallen, after a very weak UK CPI release led the market to price a better-than-even chance of a BoE rate cut later this month. Despite broad-based USD weakness, the NZD has again underperformed and is unchanged from this time yesterday.

BNZ Markets Today

Nick Smyth -

Market moves have been subdued overnight ahead of the signing of the US-China Phase-One trade deal tonight. A lower-than-expected US core CPI release has led to a small fall in global rates while equities have moved sideways despite a strong start to the earnings season by the big US banks. Currency moves have been small, but the NZD has underperformed overnight.

BNZ Markets Today

Jason Wong -

Markets have begun the new week in a positive frame of mind, with the S&P500 recovering 0.5% to take it back near last week’s record high and global rates pushing higher. Positive risk sentiment sees JPY underperform, alongside a soft GBP as weak data support an easing in policy by the BoE. The NZD and AUD currencies are relatively flat against some strength in CNY.

BNZ Markets Today

Jason Wong -

The new year has started with some market volatility as geo-political tensions in the Middle East have increased. That said, the point-to-point market movements since our last daily report on 20 December are unremarkable. Major currencies are mostly within 0.5% of those pre-Xmas levels, global equities are up just over 1% and, perhaps more notably, NZ and US bond rates are lower (15bps and 10bps respectively).

BNZ Markets Today

Nick Smyth -

There’s not too much to report overnight with markets in the process of winding down before the Christmas break. The S&P500 has nudged up to a fresh record high while Treasury yields are little changed, near five-month highs. The USD is generally weaker, with the NZD breaking above 0.66 a short while ago. NZ GDP data yesterday was broadly in-line with expectations.

BNZ Markets Today

Jason Wong -

Markets are well-contained as trading volumes soften ahead of the holiday season. US equities are flat near record highs while global rates are higher and the US 2s10s yield curve is the steepest since July. Currency movements have been modest, with a hint of CAD strength and GBP weakness.

BNZ Markets Today

Jason Wong -

The key market mover has been a slump in GBP, as fear returned of a possible no-deal Brexit at the end of next year – sigh, the story of 2019 that keeps on giving. Other market movements have been minor apart from some noticeable independent softness in the NZD and AUD.

BNZ Markets Today

Nick Smyth -

Equity markets have made fresh record highs and bond yields have increased overnight as markets digest the US-China Phase-One trade agreement announced on Friday. The positive sentiment created by the trade deal overshadowed another batch of disappointing European PMIs. Currencies, including the NZD, have been quiet so far this week. The ANZ business survey is released today ahead of GDP on Thursday.

BNZ Markets Today

Nick Smyth -

The US-China Phase-One trade deal was announced on Friday night, although the reduction in US tariffs on Chinese imports was less than had been suggested by an earlier WSJ report. There were sharp reversals lower in global rates, the CNH and, to a lesser extent, the AUD and NZD. Equity markets, in contrast, retained most of their earlier gains. The GBP was the star performer in currency markets after Boris Johnson won a majority in the UK general election.

BNZ Markets Today

Jason Wong -

“Getting VERY close to a BIG DEAL with China. They want it, and so do we!” That one tweet by you know who has had the biggest impact on markets this week, trumping the other key risk events. US equities rose to a fresh record high, while the US 10-year treasury yield climbed as much as 11bps to 1.90%. The impact of the tweet on currency markets has been more muted, and has actually supported the USD, with reduced tariffs seen to be positive for the economy.

BNZ Markets Today

Jason Wong -

Markets have been quiet ahead of the FOMC announcement in the next hour or so. The NZD and AUD have trended higher since the NZ close for no obvious reason, seeing the NZD back up probing the high seen earlier this week. Ahead of the FOMC, the USD is slightly on the soft side, while US treasury yields have drifted lower.

BNZ Markets Today

Jason Wong -

There has been a lot of economic data and newsflow over the past 24 hours but financial markets remain in a holding pattern ahead of more important events later in the week. US equities are flat, US treasury yields are slightly higher and the NZD is slightly weaker.

BNZ Markets Today

Jason Wong -

In a quiet start to the week, US equities are flat and there have been only small changes in global rates and currencies.
It’s a fairly action-packed week ahead, but loaded towards the end of the week, with the FOMC meeting Thursday morning NZ time, the ECB meeting Thursday night and the UK election results coming in Friday. All this comes ahead of a scheduled increase in Chinese import tariffs by the US on 15-December on about $160bn of mainly consumer goods.

BNZ Markets Today

Nick Smyth -

A much stronger-than-expected nonfarm payrolls report on Friday night set the scene for increases in bond yields, the USD and equity markets. The NZD rose again on Friday, despite this broad-based USD strength, with upbeat comments from RBNZ Deputy Governor Bascand providing support. The NZD/AUD cross broke above 0.96 for the first time since August. All eyes are on HYEFU this Wednesday for the details of Labour’s “significant” fiscal package.

BNZ Markets Today

Nick Smyth -

Markets have largely been in a pre-payrolls holding pattern overnight. Treasury yields have nudged up, equity markets are little changed, and the USD has continued to drift lower. Yesterday, the RBNZ softened some aspects of its original bank capital proposal, which led the market to pare back OCR rate cut expectations and boosted the NZD. The NZD is trading at a four-month high against both the USD and AUD, with the NZD/AUD cross pushing up towards 0.96.

BNZ Markets Today

Jason Wong -

US equities and bonds reversed course from the previous night’s chunky movements after more trade news headlines, this time with a more positive tone. The US 10-year treasury yield is up 6bps. In currency markets, GBP and CAD lead the way, while the NZD has nudged higher.

BNZ Markets Today

Jason Wong -

US equities have slumped 1% and US treasury yields have rallied hard after President Trump’s comments to reporters about the US-China trade deal. Reaction in currency markets has been more muted. Modest USD weakness has prevailed, helping keep the NZD’s head above the 0.65 mark.

BNZ Markets Today

Nick Smyth -

After what was an exceptionally quiet November, there have already been some big moves to kick off December. Global rates have increased sharply, on increased talk of fiscal stimulus. Meanwhile, equity markets and the USD have declined after a weaker-than-expected ISM manufacturing survey. The NZD is up more than 1% against the USD and has risen on all the crosses, with NZD/AUD breaking above 0.95, after Grant Robertson signalled a “significant” fiscal stimulus over the weekend.

BNZ Markets Today

Nick Smyth -

Friday again saw limited moves across asset classes (oil excluded) with market participation and trading activity lighter than usual after Thanksgiving. Friday brought to an end an exceptionally quiet November in the FX market, with the NZD recording its second-narrowest trading range in 20 years. There is more on the cards for this week, with the final outcome from the RBNZ bank capital review announced, the US ISM surveys, payrolls, and Australian GDP all released. Over the weekend NZ Finance Minister Grant Robertson foreshadowed a “significant” fiscal stimulus, so rates should open higher and steeper this morning.

NZ At A Glance

New Zealand At A Glance

Stephen Toplis -

Covid-19 is viciously clouding the economic outlook. The behavioural response to the arrival of this threat is unprecedented so comparison with previous shocks of this type are unhelpful. Accordingly, forecasts at this time should be treated with more caution than normal. We can, however, clearly identify the risks that about. With this in mind, it is apt that financial markets are pricing in a very real chance of a monetary policy response. And for businesses, it is imperative that contingency plans are made for potential supply-chain shocks; demand side impacts; staffing shortages; and short-term cash flow issues.

New Zealand At A Glance

Stephen Toplis -

The mood of the country appears to have stepped up a tad over the last few weeks. You wouldn’t describe the business sector as being optimistic but confidence levels have certainly ticked up enough to suggest the economy is approaching its cyclical low. Consequently, the risk we may face negative interest rates has reduced markedly particularly given that headline inflation now looks set to head above 2.0% within six months and the labour market remains tight. Moreover, fiscal policy looks increasingly likely to be supportive of growth over the medium term.

Rural Wrap

Dry, Disease, and Deals

Doug Steel -

Over the past couple of months, there have been three developments with the potential to materially alter the performance of NZ’s agriculture sector and economy over the period ahead. The first one is local, with dry conditions intensifying. The second is a coronavirus disease outbreak in China causing major disruption to activity as authorities try to contain the virus. The third is a deal between the US and China on trade. The balance of these developments poses downside risks to our already tepid-looking GDP growth expectations, at least for the first half of 2020.

Food Nourishing Exports

Doug Steel -

Food exports look set to lift NZ’s merchandise exports to a record high in 2019. Further export gains are expected next year, on elevated primary product prices. Meat prices are leading the charge, amplified by the impact of African Swine Fever on pigs in China. We see NZ’s food trade surplus lifting to over $30 billion, supporting both NZ growth and the nation’s external balances.