Here's our summary of key economic events over the weekend that affect New Zealand with news today we are now in a 'new world economy' and it will take some getting used to. The roll-out and consequences will develop over days, weeks, months, and years.
The immediate past is irrelevant today. Tomorrow will be quite disconnected from the recent past.
But first up, we have a busy week ahead. On Wednesday, the RBNZ will release the results of its OCR review, and a -25 bps cut is anticipated, taking it to 3.50%. It has been clearly signaled by the central bank, although we should note that much has happened to change the immediate economic outlook over the rest of 2025 and beyond.
The Indian central bank will also review its policy rate, also on Wednesday, and a -25 bps cut is also anticipated there from the current 6.25%.
Elsewhere both the US and China will release CPI and PPI inflation data. EU retail sales data and German industrial production data will also come this week.
But nothing will be as influential as the tariff war hostilities, punch and counterpunch. Over the weekend China has responded to the US tariffs with its own sweeping restrictions on trade with the US, with more to come. In all, we count eight major announcements on restriction of trade with the US.
China placed export restrictions on rare earth elements squeezing supply to the West of minerals. These materials are used in optical lasers, radar devices, high-powered magnets for wind turbines, jet engine coatings, communications and other advanced technologies. That leaves many manufacturers scrambling for fresh supplies of the critical minerals they have relied upon for decades.
Late last week we reported that Canada retaliated. But so far, we haven't heard of EU retaliation, although they are huddling to plan a united response. (And oddly, no US tariffs were applied to Cuba, Iran, North Korea or Russia - even though the US runs a large -US$4 bln trade deficit with Russia.)
Fed boss Powell was speaking over the weekend and he said the economic impact of new tariffs is likely to be significantly larger than expected, and the central bank must make sure that doesn’t lead to a growing inflation problem. "The same is likely to be true of the economic effects, which will include higher inflation and slower growth."
All this will have very large secondary effects on New Zealand, and our currency dived sharply on the news at the end of last week. It was an even larger negative reaction for Australia.
Commodity prices have taken outsized hits, all consistent with pricing for a deep recession. Copper is down -16.5% since its late-March peak. It is far from the only one, and the adjusting is still underway. Gold wasn't immune. Nickel, zinc, and aluminium are all also down sharply. So far, food prices haven't really moved much, and the FAO report for March confirmed that.
Those secondary reactions will be widespread however. The airfreight market is expected to be thrown into turmoil, up in the immediate scramble to get ordered goods, then a deep drought, as it will be for shipping. Collapses will further hinder the reduced trade expected.
The key takeaway from all this is unsettling - this isn't the bottom. It may only be the start of a steep decline. It certainly is a 'Black Swan' event. That tariffs were coming, no surprise. But the size and comprehensiveness were very much larger than anyone, friend or foe, expected. Everyone should be worried, especially savers. Stagflation is the most likely future we face.
For the record, there was economic data out over the weekend. The US non-farm March payrolls came in better than anticipated with a +228,000 seasonally adjusted rise in the month. The monthly average gain in 2025 is now the lowest since the 2020 year (and also lower than any year 2016-2019.) Canada reported a -33,000 drop in March employment. Deeper rate cuts are the likely Bank of Canada response, and soon - on April 17, NZT.
And across the Pacific, Japanese household income rose more than expected in February from the steep drop in January. But it wasn't enough to show a gain year-on-year.
German factory orders remained low in February, and unchanged from January in an undershoot.
But none of this recent-history data really means much any more.
The following changes are outsized, and still moving. But this is what we see now.
The UST 10yr yield is now at 4.00%, down -25 bps from a week ago. The key 2-10 yield curve is steeper at +36 bps. Their 1-5 curve is inverted by -13 bps, holding the sharp deepening. And their 3 mth-10yr curve is less inverted that on Saturday, now by -30 bps. The Australian 10 year bond yield starts today at 4.18% and down -9 bps on Friday alone. The China 10 year bond rate is now at 1.79% and unchanged due to their Ching Ming Festival holiday on Friday. The NZ Government 10 year bond rate is now at 4.35%, and down -31 bps from a week ago. We should also note that wholesale swap rates tumbled Friday by about -10 bps, and after retaliatory news are likely to fall sharply again today. Every one of these moves is outsized in a fear-induced way.
The VIX volatility index has jumped suddenly, moving up towards an extreme level.
Wall Street fell hard in its Friday trade with the S&P500 down -6.0% on the day and the Nasdaq was down -5.8%. The S&P500 futures trade suggests a small part of that (maybe +0.7%) could be recovered when Monday trade resumes.
The price of gold will start today at just on US$3037/oz, up +US$17 from Saturday but down a net -US$71 from Friday, a huge move as gold is just being classed as "another commodity". Also, even before the latest tariff chaos, the Germans were worried about a Trump America, and talking about relocating its gold reserves out of New York. Those voices are louder now.
Oil prices have dropped another huge -US$4.50 from Friday at just on US$62/bbl in the US and the international Brent price is now just on US$65.50/bbl. This market faces steep demand drops just as it wants to increase production.
The Kiwi dollar is now at 55.9 USc, up +30 bps from Saturday but an enormous -220 bps dump from this time Friday, down -4.3%. Against the Aussie we are down -10 bps at 92.5 AUc and the Aussie dollar took an even larger hit on Friday. Against the euro we up +20 bps but down -150 bps from Friday at just under 51.1 euro cents. That all means our TWI-5 starts today now just on 65.8 and down -120 bps from Friday to its lowest since the brief pandemic dive on March 20, 2020, and before that in March 2011 as the GFC bit hard.
The bitcoin price starts today at US$81,097 and down -3.2% from this time Saturday. Volatility over the past 24 hours has been modest at +/- 1.5%. Update: Bitcoin is tanking, now down below US$79,000.
[Due to staffing holidays, the video version of this review will not return until April 28, 2025.]
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
22 Comments
The unleashing of the orange swan.
All it will take is a few banks to be exposed for over leveraged plays on stocks and it's 2008 again. Banks get scared lending to each other and debt without income becomes a very toxic asset/mill stone. Throw in the heavy targeting of Asia and the launching of the BRICS currency option, and more change is coming.
it's easy to see why Buffet is long cash.
(deleted - double post)
Why has our dollar dropped so significantly against the USD and Euro? Is it because we're so heavily reliant on trade that the tariffs will have an outsized impact on us?
We're undertaking a protracted period of risk revaluing. Expect decent volumes of price movement all over the map for the coming months/years, as money tries to find a safe haven, and pundits try to remodel the global economy.
It’s a new era, says Singapore’s Prime Minister:
I keep an eye on the NZD:GBP and it has dropped as well against the GBP in the last week. If the UK economy is bad ours must be worse, or at least will get worse.
NZD has risen a bit against AUD last week, I'm waiting for 0.94c to move some money over
As an export-driven economy the NZD is vulnerable to trade disruptions even if not directly involved. The Trump tariffs signal a shift to protectionism and a potential slowdown of global trade. We could be selling off in anticipation of lower global demand of NZ goods.
Also two days ago Powell said the Fed is in no rush to react with cuts. RBNZ meanwhile look set to cut another 25bp this week. Markets could be pricing in that NZ will require more rate cuts than forecasted due to this trade disruption?
Risk off sentiment has taken over and it seems the USD is a safer haven than the NZD currently
Risk off sentiment has taken over and it seems the USD is a safer haven than the NZD currently
Currently...but for how long, is the big question.
It's largely deleveraging. Big macro accounts hold massive cross asset positions and one of the favourites has been long AUD as they have been relatively one of the better performing economies. So when you get outsize market moves margin call and deleveraging comes into play. One of the biggest victims right now is the AUD, so although we tend to follow the AUD we have outperformed them over the last few days which as you can imagine doesn't really make any sense. So NZD down because of the AUD.
Risk-off...more demand for USD as seen as a safe haven. Though that might all change if Trump succeeds in what many suspect is his master plan, to devalue the USD.
That drop in gold price is traders cashing out to cover their losses from the carnage on the stock market
Everyone should be worried, especially savers. I would have thought that with all the coming uncertainty cash would be king and people like me with more than my share of debt should be more concerned as banks become more conservative and asset values supporting that debt could go in any direction.
Buffett’s sitting on 60-70% cash, not looking worried at all. I’m sure he’s glad he sold when he did.
In times like these, those who loose least preserve most. Cash is certainly king. Savers via Kiwisaver managed funds involving higher risk assets will be hit hardest. Many will be transferring to lower risk as we speak causing more selling. Another new normal has been thrust upon us all.
Dangerous to jump now we already down 15%?
no US tariffs were applied to Cuba, Iran, North Korea or Russia - even though the US runs a large -US$4 bln trade deficit with Russia.
The administration said today, that no tariffs on Russia is because there is an open negotiation over Ukraine going on.
You've got to laugh given Putin is not talking. My guess is he threatened Trump family businesses.
Or he's a potential customer for Trump coins.
Commodity prices have taken outsized hits, all consistent with pricing for a deep recession
Opening of the ASX will be interesting. Suspect Fortescue is going to rekt and noticed its already 40% down over past 12 months and 19% year to date. If there were ever a bellwether of the Aussie-China trading relationship, Forty gives you all the drama.
Curious to see how the Aussie banks - the engine room of the Ponzi - hold up. CBA in particular is the gift that keeps on giving and its share price is up 150% over past 5 years. On price to earnings, one of the world's most expensive bank stocks.
"Australian shares poised for ($110 Billion) plunge as Wall St crashes, dollar below 60 US cents"
https://www.abc.net.au/news/2025-04-07/asx-markets-business-news-live-u…
Futures are looking like another ~5% fall on the US indices their Monday morning.
Getting absolutely smashed, even the gold miners are down 5-10%
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.