NZD is over 1.60% stronger than the USD to 0.6890; NZDAUD broke past resistance of 0.9600 to a high of 0.9645; RBNZ left cash rate unchanged at 1.75%

NZD/USD

The New Zealand Dollar (NZD) is over 1.60% stronger than the US Dollar (USD) to 0.6890 after US dollar broad weakness and RBNZ comments. The kiwi has benefited from positive risk sentiment after what looked to be a step in the right direction in Beijing as US and Chinese negotiators came closer to an agreement on tariffs. The deadline date of March 2nd when tariffs will go from 10% to 25% for the Chinese could possibly be moved out Trump has said. Thin Monday sessions have taken the kiwi off the high easing back to 0.6850. Zero data on the NZ calendar this week means the kiwi could be pushed along via offshore action, US Fed speakers will speak later in the week mainly on monetary policy.

NZD/AUD (AUD/NZD)

No such luck for sellers of Australian Dollars (AUD) with price Friday breaking past resistance of 0.9600 to a high of 0.9645 versus the New Zealand Dollar (NZD). RBNZ comments from Adrian Orr made sure the NZD tracked higher when his remarks were less dovish than markers were expecting. The chances of a drop in the cash rate is now 50/50 through to the end of 2020. No data this week on the kiwi docket will see the kiwi driven by Aussie data in particularly employment figures Thursday. RBA governor Lowe speaks Friday, if anything is to go off his previous talks he will talk the Aussie down.

NZD/GBP (GBP/NZD)

The British Pound (GBP) has reversed  some of last week’s losses against the New Zealand Dollar travelling back down towards 0.5300 (1.8860) Tuesday. After last week’s RBNZ comments and risk on sentiment the kiwi pushed to a 15 January high of 0.5360 (1.8670). As we have said, until Brexit certainty becomes a thing most GBP crosses will remain choppy well through the 29th March deadline. Overnight we have seen the odds increase of article 50 being extended after seven labour MP’s broke from the party. This will hamper any chances of Labour pushing a general election to negotiate Brexit. Theresa May also received a telling off by four cabinet ministers to stop using the “no deal” Brexit scenario as a negotiating tactic. Businesses and manufacturers need certainty so perhaps it’s time for May to properly rule out this option entirely. Just UK employment figures on the calendar this week and more bouncy action around current levels.

 NZD/CAD

The New Zealand Dollar (NZD) extended gains against the Canadian Dollar (CAD) deep into Friday sessions and extending into Monday reaching a fresh high of 0.9120. Price has eased lower to 0.9060 Tuesday with a lack of liquidity drivers. Crude oil is up over 56.00 which has led to better prices for the CAD. Canadian Retail Sales prints Friday, with nothing on the NZ docket this week.

NZD/EURO (EURO/NZD)

The Euro (EUR) sank to 0.6090 (1.6420) last week a yearly high against the New Zealand Dollar (NZD) after risk markets were buoyed by positive trade talks in Beijing between US and Chinese negotiating officials. Equity markets have been doing well the DOW nearly at 26000 1.70% on the day, add in some RBNZ positive reinforcement comments and what we get is a pair trading just off the multi-year high of 0.6130 (1.6320). However, the Euro has caught a break overnight in a volatile thin market pushing to 0.6060 (1.6510) on the back of terrible US Retail Sales figures. Eurozone manufacturing figures are due later this week.

NZD/YEN

After the New Zealand Dollar (NZD) received a massive boost by the RBNZ last week, risk returned to markets with the Japanese Yen (JPY) out of favour, the kiwi reaching 76.20 Monday. Trade talks have gone well between US and Chinese negotiators which has pushed up equities and risk based products. The pair will bobble around current levels with no data to print this week. Any shift from the current 75.70 level will be offshore driven.

AUD/USD

The Australian Dollar (AUD) continued last week’s bullish run from 0.7080 into Monday reaching 0.7160 as risk related currencies were favoured. Friday’s US Retail Sales printed poor giving cross pairs a chance to improve, the Aussie 0.65% up on the US Dollar on the day. Australian Wage price index Wednesday followed by employment data Thursday is firmly the weekly focus with five FED members to speak later in the week as well as the RBA- the cross could track anywhere. 0.7050 is acting as support, we would be surprised if price travels below here.

AUD/GBP (GBP/AUD) 

The British Pound (GBP), Australian Dollar (AUD) pair continues to be driven by central bank speak and Brexit woes. With positive comments coming overnight on Brexit we have seen price move higher for the Pound to 0.5520 (1.8120). As we have said, until Brexit certainty becomes a thing most GBP crosses will remain choppy well through the 29th March deadline. Overnight we have seen the odds increase of article 50 being extended after seven labour MP’s broke from the party. This will hamper any chances of Labour pushing a general election to negotiate Brexit. Theresa May received a telling off by four cabinet ministers to stop using the “no deal” Brexit scenario as a negotiating tactic. Businesses and manufacturers need certainty so perhaps it’s time for May to properly rule out this option entirely. Both UK and Australian employment figures publish this week, tonight and Thursday with both expecting excellent figures.

AUD/EURO (EURO/AUD)

The Australian Dollar (AUD), Euro (EUR) remains choppy as ever. Last week was the Aussie Dollar’s turn to advance on the EUR with the pair travelling to 0.6330 (1.5800) where it closed. The Euro picked up some support Monday in thin US holiday trading reversing some losses back to 0.6305 (1.5860) This week is a busy one for the cross with French and German manufacturing data to release along with Aussie employment figures. We expect risk to continue this week with price action to return to the high of 0.6330 (1.5800). Friday RBA governor Lowe speaks again, if he continues to paint the Aussie economy in a negative light as has done recently we could see Aussie Dollar weakness.

AUD/YEN

The Australian Dollar (AUD) extended last week’s gains into Monday’s trading against the Japanese Yen (JPY) on improved risk sentiment. Preliminary Japanese GDP turned in negative printing at 0.3% based on predictions of 0.4% and weakened the currency but it was positive news relating to trade talks in Beijing which bough risk products back in play. Tuesday with a lack of liquidity from a US holiday the pair has dropped back to 78.80. Aussie unemployment figures this week will be key followed by RBA governor Lowe speaking Friday which should offer no real surprises.

AUD/CAD

The Australian Dollar (AUD) extended last week’s gains against the Canadian Dollar (CAD) to 0.9475 Monday before easing back towards 0.9430 on surging Crude Oil prices. It’s a busy week for the Aussie with plenty of data to publish including employment data. Canadian Retail Sales prints Friday. We still favour a retest of 0.9760 the December high once trade talks have been agreed between China and the US.

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Market commentary:

US Presidents Day holiday Monday made for quiet markets with a slow start to the week. The US Dollar came under pressure towards the end of the week which has carried over into this week’s trading pushing most currencies against the greenback north. President Trump declared a national emergency late last week in an effort to obtain his required 5.7 Billion to build his wall along the Mexico Border. He has already received approval by the democrats for 1.376 Billion but as per his campaign promise he is insisting the wall be built regarding a matter on national security. Going against congress approval could get the president in hot water legally. Thousands of people has rallied in protest against the national emergency on the Presidents holiday with protesters carrying banners saying “Trump is the Emergency”. Protesters and civil rights organisations have asked congress to step in and take action against the move by Trump. With the weaker US retail sales figures printing Friday the US Dollar index has come off to 96.78  but still remains fairly robust with equities pushing higher the three main US indices up over 2% from last Thursday. US officials met with Chinese negotiators in Beijing to hold further talks regarding the ongoing trade tariff disputes. Both parties have hailed the meeting as progress with further talks to continue this week in Washington. As the 2 March deadline looms where tariffs will be pushed from 10% to 25% we view the situation from the top of the fence - from here anything is possible. A swag of data is to publish on the economic docket this week starting with RBA minutes today and ending with FED members speeches at the end of the week. All eyes will also be on UK and Aussie employment figures. The New Zealand Dollar has a quiet week and will be driven by offshore developments.

Australia

Risk sentiment in markets has pushed the Australian Dollar up over the three week resistance level of 0.7135 to reach a high of 0.7150 against the US Dollar Friday. Risk currencies surged after US data came in weaker than expected and positive trade comments were made by Trump. Talks held in Beijing ended without any controversial and the yanks not throwing their toys. Trump commenting saying good progress was made. This week in Washington further discussion will be held to potentially resolve the long term tariff problem. We will certainly see a pickup in the mineral dependent Australian economy if trade talks continue positively and we see higher iron ore prices as expected. This week it’s all about Jobs data, starting with Wage price index Wednesday then Employment data Thursday. The unemployment rate is expected to remain at 5.0%

New Zealand

The New Zealand Dollar pushed into new territory prior to the weekly close, the strongest currency of the major bunch. Against the US Dollar it travelled through 0.6850 resistance on its way to reach 0.6875, nearly 2.5% higher versus the Japanese Yen as positive risk sentiment in markets and currencies was evident. President Trump comments to media were positive at the end of last week’s Beijing trade talks. He said the meetings went "extremely well" with further talks expected to continue this week in Washington. While some economic data locally has been weaker of lately, comments are surfacing suggesting the NZ economy is not stalling and the chances of a severe downturn are unlikely with the inflation forecast not expecting to go below 1.0% This week we have a light calendar with only the Global Dairy Auction Wednesday. With positive prices over the last 6 weeks can we go one better than last fortnights result of +6.7%?

United States

Trump again is the center of attention as he declares a National Emergency to build a wall along the Mexico border to stop illegal immigration. The White House has defended his move under a 1976 law giving presidents authority. He has requested funds of 5.7 Billion and received approval for only 1.376 Billion from congress. We note that of the previous 59 occasions prior which presidents have declared a national emergency none have been in direct refusal from Congress. Trump now plans to use other funds put aside for other projects to get the wall off the ground, he may receive lawsuits to stop him using these funds. The plan is to build over 320 Kilometres of walls in time for Trump to stand again for re- election. Poor US data kept the US Dollar on the back foot as Retail Sales printed down at -1.2% after 0.1% was expected along with US industrial production falling 0.6% after expectations of 0.1% for January. However the University of Michigan Sentiment index lifted to 95.5 from last month’s 91.2 boosting the greenback. This week’s sees a slew of Fed speakers later in the week.

Europe

The Euro has been caught in a downward spiral against most currency pairs based on recent central bank dovishness. Last week it drifted to a low of 1.1235 before a little optimism creeped back into play with the Euro clawing back losses to 1.1320 against the bearish weakened greenback. Significant to this move is the break away/higher from the bearish move from 1.1515 as the Euro looks to improve on this early this week.  While we have also a lot of USD risk with the US political scene, yields are still showing plenty of room for bigger adjustment from the Fed. The bi-product of this, is a good chance the EUR will trade back towards the yearly high of 1.1600 over the next few months. French and German Manufacturing figures release on the economic docket this week as well as the ECB President Draghi speaking later in the week. The French will be hoping they can repeat the good numbers from last month and make it two in a row.

United Kingdom

The English are starting to buy up Euros as the Brexit deadline draws closer. Figures out are suggesting purchasers of Euro are up by matching the statistics of recent years. The British are a worried people and have demonstrated their fears of the Pound depreciating sharply if the UK crashes out after 29 March this year. The Pound had mixed results last week losing 2.20% in value to the New Zealand Dollar but gained on the Yen. Friday's trading saw a reversal of sorts with renewed enthusiasm for risk trades and US Dollar weakness. Versus the greenback it came off a low of 1.2770 to trade back at 1.2920 Monday morning. UK Retail Sales gave the GBP a kick releasing at 1.0% from the 0.2% expected rebounding from December's -0.9% illustrating tough times around Christmas for the British. This week’s unemployment rate and average earnings should show a slight improvement also in the December figures

Japan

The Japanese Yen is the weakest performer over the past week depreciating against all the major currencies, coming off 2.4% against the New Zealand Dollar. Risk sentiment has been good this week with a positive mood coming from President Trump towards his border Wall fiasco and trade talks with China. Japan's economy grew by 1.4% y/y in the final three months of 2018 rebounding off the third quarter contraction of 2.6%.  Analysts remain concerned that exports in Japan will weaken this year if the US government and China don't resolve their ongoing trade dispute. Although the economy has rebounded it is still losing momentum, the longer the dispute wears on the weaker exports will be in Japan. Monday afternoon's Japanese Machinery Orders printed better than the expected -1.1% at -0.1% this is the total number of machinery orders received by 280 manufacturers in Japan for the month of January.

Canada

Following on from Canada's whopping job numbers figures from the previous week was manufacturing Sales which printed way down on the 0.3% expectation, to -1.3% denting the CAD. Manufacturing numbers decreased for the third month in a row with the most notable falls in petroleum and coal products. With a recent weaker US Dollar and a surging Crude Oil price back over 55.00 we have seen price move off 1.3300 levels to 1.3220 Monday versus the big dollar. In 2019 OECD levels are expected to increase through to June with projected totals expected to end at 2.96 million barrels. For 2020 stocks are projected to be 105 million more to end 2020 around 4.06 million barrels, with these numbers so high the price could be compromised, and price could be significantly lower. The Bank of Canada speaks Friday prior to Canadian Retail Sales.

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