HiFX Morning Update

The NZDUSD opens sharply lower at 0.7295 this morning.

Is this the end of the golden summer for the NZDUSD and global equity markets?

Friday night’s US non-farm payrolls employment figures exceeded expectations. Job growth picked up and wages increased at their fastest pace since 2009 – the financial markets reacted violently with US bond yields surging higher (lower prices), equity markets plunged, the USD jumped higher, and the NZDUSD fell sharply.

The US employment data contributed to sentiment that US inflation is finally gathering momentum and higher interest rates are on the horizon. The markets have almost fully priced in 3 interest rate hikes in the US during 2018, with the first anticipated in late March. Higher interest rates are generallynegative for equity markets and positive for the USD (hence lower NZDUSD).

The RBNZ has a monetary policy (interest rate) meeting on Thursday. There is next to no chance of any interest rate increase any time soon, as inflation and inflation expectations remain lower than the RBNZ desires – low wage growth is part of the problem.

Bitcoin and cryptocurrencies also plunged, this was more to do with regulatory concerns than US jobs numbers.

There is nothing scheduled on the NZ data calendar today,ahead of the Waitangi Day holiday Tuesday. Wednesday bringsquarterly employment numbers, followed by the RBNZ OCR (official cash rate) meeting and Monetary Policy StatementThursday.

Global equity markets nose-dived on the day – Dow -2.5% (largest fall in 2-years), S&P500 -2.1%, FTSE -0.6%, DAX -1.5%, CAC -1.6%, Nikkei -0.9%, Shanghai +0.4%.

Gold prices fell 1.0% to USD$1,333 an ounce. Oil prices (WTI) dropped 1.1% to USD$65.06 per barrel.

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