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Research
Markets Today
7 February 2023
Events Round-Up growth was moderate at 0.3% m/m, as expected, seeing a
slowing in annual wage inflation to 4.4%.
NZ: ANZ consumer confidence, Jan: 83.4 vs. 73.8 prev.
Soon after that release the ISM services index
CH: Caixin PMI services, Jan: 52.9 vs. 51.0 exp.
unexpectedly recovered strongly to 55.2, after December’s
US: Change in nonfarm payrolls (k), Jan: 517 vs. 190 exp. plunge. That plunge had corrected the gap with the
US: Unemployment rate (%), Jan: 3.4 vs. 3.6 exp. alternative PMI services index, but with the latter only
revised up slightly to 46.8, the inexplicable gap has
US: Average hourly earnings (y/y%), Jan: 4.4 vs. 4.3 exp.
returned. Of note, the new orders component surged
US: ISM services index, Jan: 55.2 vs. 50.5 exp. 15pts to 60.4, while the prices paid series moderated
AU: Real retail sales (q/q%), Q4: -0.2 vs. -0.5 exp. further to a still-high 67.8. The data suggested that the
services sector of the economy was still in reasonable
GE: Factory orders, (m/m%), Dec: 3.2 vs. 2.0 exp.
shape, despite 450bps of rate hikes, and this raised the
question of how quickly inflation could fall against that
Good Morning backdrop and how much more policy might need to
tighten.
Friday night’s super-strong US payrolls and ISM services
reports sent markets into a tailspin and there has been
So much for the narrative that the US economy was on the
some follow-through overnight, driving weaker global verge of economic recession. The data triggered a
equity markets, higher global rates and a big rebound in significant market reaction, with the market moving
the USD. The US 10-year rate is back up through 3.6% and
towards the Fed’s view on rate hikes ahead, having only
the two-day sell-off will spill over into the domestic rates just moved in the opposite direction post-FOMC meeting,
market today, from their multi-month lows recorded on resulting in much higher Treasury yields. Over two trading
Friday. The NZD has fallen nearly 3% since Friday afternoon sessions, the market has priced in a full extra 25bps hike
to below 0.63.
from the Fed over coming months, with the peak rate of
5.15% now consistent with the Fed’s December projection
For locals returning from the long-weekend, there has of a peak 5-5.25% target range for the Fed Funds rate, up
been some notable price action across markets both Friday from the 4.90% level preceding the data. Add to that, the
night and, to a lesser extent, last night. Key US data market’s pricing of easier policy over the second half of the
released Friday were surprisingly strong and raised more year has been pared back.
questions than answers about the state of the US
economy, the likelihood of recession and how the Fed
The change in policy expectations has fed through into
should respond. As the data up-ended the prevailing Treasury yields with the 2-year rate up 17bps for the day,
narrative and caught markets offguard, there has been a adding to the 18bps lift on Friday, to 4.45%. The 10-year
significant market reaction, seeing a strong reversal of rate is up 11bps for the day, adding to the 13bps lift on
price action seen across asset markets so far this year.
Friday, to 3.63%. The move has spilled over into other
markets, with European yields notably higher as well,
The US employment report was unmistakably strong, with Germany’s 10-year rate up 21bps over the two sessions to
non-farm payrolls surging 517k in January, alongside 2.30%. Since the NZ close on Friday, the US 10-year rate is
significant upside revisions to prior data and a strong up 26bps, while the Australian 10-year bond future is up
rebound in average weekly hours. Stronger employment 15bps in yield terms.
drove the unemployment rate down to a 53-year low of
3.4%. Some might point to seasonal adjustment issues for
The US-led rise in rates and the stronger US economic
January, but the strength of employment fits the pattern backdrop have driven the USD much higher, with the DXY
seen in the strong JOLTs report and the surprisingly lower index almost back to where it began the year. Reflecting
trend for initial jobless claims over the past couple of their higher beta status, the NZD and AUD have been two
months. It played to the theme of the US job market
of the worst performing major currencies, down in the
remaining very tight, despite the economic slowdown. Of order of 2.7-2.8% since we left the office on Friday. It was
some consolidation was that average hourly earnings only last week that the NZD traded at a fresh 8-month high
www.bnz.co.nz/research Page 1Markets Today 7 February 2023
0.6537, but all of 2023’s gain, plus some, has been wiped December, continuing the positive economic surprise
out and it currently trades at 0.6285, below the 0.6350 theme that has been in play for the Euro area over recent
level it began the year. After trading above 0.7150 on months.
Friday, the AUD is currently 0.6870.
The domestic rates market rallied strongly on Friday,
Some added geopolitical tension between the US and reflecting the chunky falls in global rates seen Thursday
China won’t be helping these risk-currencies, after the US night in response to the less hawkish ECB and BoE policy
shot down a Chinese spy balloon that had been moving outlooks. Curves showed a flattening bias, with falls led by
across the country. Fears of some sort of tit-for-tat the long end of the curve, NZGBs down in the order of 10-
economic retaliation now overhangs the market. 15bps, the 10-year down to a fresh multi-month low of
3.92%. Swap rates were down 7-13bps, showing the same
JPY has been the worst of the majors, with USD/JPY flattening bias and multi-month lows for the 2-year rate at
heading up towards 133, and over 3% weaker over the two 4.70% and the 10-year rate at 4.04%. These rates will
trading sessions. While the much higher global rates seem a distant memory today, as the market plays catch-
backdrop has been ostensibly yen-negative, there was an up to the big overseas moves seen since the Friday close,
extra kicker yesterday after a media report that Deputy as noted earlier.
Governor Amamiya had been approached to replace
Kuroda as Governor. Even though he was already the hot It is an uneventful week on the economic calendar but
favourite the market reacted, not liking this vote for market conditions could remain volatile on a reassessment
continuity of the BoJ’s current ultra-easy policy stance. A of economic and policy views. This afternoon’s RBA
Japanese government official refuted the report, but meeting is one of the few highlights, where most
where there’s smoke there’s fire. economists expect a 25bps hike to 3.35%, and this is well
priced by the market. The RBA was late to join the
EUR, GBP and CAD have all fallen by less against the USD tightening cycle, rates remain low by global standards, and
than the NZD, so NZD crosses are lower against these since core inflation continues to surprise on the upside, so
Friday. NZD/AUD has been relatively steady around 0.9150 expect forward guidance to continue to show a bias to
while NZD/JPY is up slightly to 83.5. tighten further. Fed speakers will be on the circuit this
week and first up is Chair Powell early tomorrow morning,
In equity markets, the S&P500 is currently down 0.6%, where he has a chance to comment on the strong jobs
following the 1% fall on Friday, damage limited to the report.
extent that while rates might be higher, a stronger US
economy than expected is more earnings supportive. Dell jason.k.wong@bnz.co.nz
Technologies became the latest US tech firm to announce
big job cuts, with the company looking to cut about 6,650 Coming Up
roles or 5% of its workforce. The recent rise in announced
job layoffs that is plain to see, being widely reported and Period Cons. Prev. NZT
quantitatively measured by the Challenger job layoff AU Trade balance ($b) Dec 12.4 13.2 13:30
series, has yet to flow through into the initial jobless claims AU RBA Cash Rate target (%) Feb 3.35 3.1 16:30
series. This could simply reflect lagged effects, with GE Industrial production (m/m%) Dec -0.8 0.2 20:00
unemployment insurance not available until severance pay US Trade balance ($b) Dec -68.5 -61.5 02:30
has been accounted for.
US Fed Chair Powell speaks in Washington 06:00
CA Governor Macklem speech in Quebec City 06:30
In other overnight news, German factory orders
Source: Bloomberg, BNZ
rebounded by a larger than expected 3.2% m/m in
www.bnz.co.nz/research Page 2Markets Today 7 February 2023
Foreign Exchange Equities Commodities**
Indicative overnight ranges (*) Other FX Major Indices Price
Last % Day Low High Last % Day Last % Day % Year Last Net Day
NZD 0.6284 -0.7 0.6270 0.6334 CHF 0.9284 +0.3 S&P 500 4,115 -0.5 -8.6 Oil (Brent) 80.78 +1.0
AUD 0.6871 -0.8 0.6856 0.6948 SEK 10.644 +1.0 Dow FALSE -0.2 -3.5 Oil (WTI) 73.97 +0.8
EUR 1.0714 -0.8 1.0714 1.0798 NOK 10.365 +1.4 Nasdaq 11,917 -0.8 -15.5 Gold 1863.6 +0.0
GBP 1.2014 -0.4 1.2006 1.2077 HKD 7.846 -0.0 Stoxx 50 4,205 -1.2 2.9 HRC steel 790.0 -0.9
JPY 132.77 +1.2 131.59 132.90 CNY 6.795 -0.0 FTSE 7,837 -0.8 4.3 CRB 266.2 -2.0
CAD 1.3446 +0.4 SGD 1.328 +0.4 DAX 15,346 -0.8 1.6 Wheat Chic. 762.3 -0.8
NZD/AUD 0.9146 +0.0 IDR 15,055 +1.1 CAC 40 7,137 -1.3 2.7 Sugar 20.69 -2.5
NZD/EUR 0.5865 +0.1 THB 33.75 +0.9 Nikkei 27,694 +0.7 1.6 Cotton 83.55 -2.2
NZD/GBP 0.5231 -0.3 KRW 1,253 +2.0 Shanghai 3,239 -0.8 -5.6 Coffee 176.2 +1.9
NZD/JPY 83.43 +0.5 TWD 29.99 +0.9 ASX 200 7,539 -0.3 6.0 WM powder 3420 +0.1
NZD/CAD 0.8449 -0.4 PHP 54.40 +1.3 NZX 50 12,197 +0.4 -0.7 Australian Futures
NZ TWI 70.98 -1.2 3 year bond 96.86 0.00
Interest Rates 10 year bond 96.47 -0.03
Rates Swap Yields Benchmark 10 Yr Bonds NZ Government Bonds NZ Swap Yields
Cash 3Mth 2 Yr 10 Yr Last Net Day Last Last
USD 4.75 4.83 4.72 3.62 USD 3.64 0.11 15-Apr-25 4.22 -0.10 1 year 5.15 -0.06
AUD 3.10 3.36 3.65 4.09 AUD 3.46 0.08 15-Apr-27 3.85 -0.11 2 year 4.70 -0.07
NZD 4.25 4.89 4.73 4.07 NZD 3.92 -0.14 15-May-28 3.79 -0.12 5 year 4.08 -0.11
EUR 2.00 2.55 3.28 2.87 GER 2.30 0.10 15-May-31 3.83 -0.13 7 year 4.04 -0.12
GBP 4.00 4.16 3.95 3.32 GBP 3.24 0.19 14-Apr-33 3.92 -0.14 10 year 4.04 -0.13
JPY -0.02 -0.03 0.19 0.83 JPY 0.51 0.01 15-May-41 4.20 -0.14 15 year 4.10 -0.13
CAD 4.50 5.00 4.38 3.45 CAD 3.05 0.12 15-May-51 4.13 -0.14
* These are indicative ranges from 5pm NZT; please confirm rates with your BNZ dealer
** All near futures contracts, except CRB. Metals prices are CME.
Rates are as of: NZT 06:57
Source: Bloomberg
www.bnz.co.nz/research Page 3Markets Today 7 February 2023
NZD exchange rates
6/02/2023 6:57 am Prev. NY close 0.66 NZD/USD - Last 7 days
USD 0.6284 0.6331
0.65
GBP 0.5231 0.5251
AUD 0.9146 0.9145 0.64
EUR 0.5865 0.5865
JPY 83.43 83.06 0.63
CAD 0.8449 0.8482 0.62
CHF 0.5834 0.5863
DKK 4.3654 4.3660 0.61
FJD 1.3769 1.3757 31-Jan 01-Feb 02-Feb 03-Feb 04-Feb 07-Feb
HKD 4.9304 4.9676
INR 51.99 51.81 NZD/AUD - Last 7 days
0.92
NOK 6.5131 6.4701
PKR 173.22 170.94
PHP 34.18 33.98
PGK 2.2127 2.2261
0.91
SEK 6.6889 6.6722
SGD 0.8347 0.8379
CNY 4.2699 4.3038
THB 21.16 20.86
0.90
TOP 1.4662 1.4491
VUV 73.87 73.49 31-Jan 01-Feb 02-Feb 03-Feb 04-Feb 07-Feb
WST 1.6813 1.6674
XPF 69.58 69.51 NZD/USD - Last 12 months
ZAR 11.1107 11.0638 0.72
0.70
0.68
0.66
0.64
NZD/USD Forward Points 0.62
BNZ buys NZD BNZ sells NZD 0.60
1 Month 1.65 2.11 0.58
3 Months 2.73 3.23 0.56
6 Months 3.59 5.09 0.54
Feb-22 Apr-22 Jun-22 Aug-22 Oct-22 Dec-22
9 Months 5.24 7.38
1 Year 6.43 9.79
NZD/AUD - Last 12 months
0.96
NZD/AUD Forward points
0.94
BNZ buys NZD BNZ Sells NZD
1 Month -7.66 -6.68 0.92
3 Months -27.46 -26.12 0.90
6 Months -60.37 -56.87 0.88
9 Months -89.75 -84.11
0.86
1 Year -115.00 -106.31
0.84
0.82
Feb-22 Apr-22 Jun-22 Aug-22 Oct-22 Dec-22
www.bnz.co.nz/research Page 4Markets Today 7 February 2023 Contact Details BNZ Research Stephen Toplis Craig Ebert Doug Steel Jason Wong Head of Research Senior Economist Senior Economist Senior Markets Strategist +64 4 474 6905 +64 4 474 6799 +64 4 474 6923 +64 4 924 7652 Mike Jones BNZ Chief Economist +64 9-956 0795 Main Offices Wellington Auckland Christchurch Level 4, Spark Central 80 Queen Street 111 Cashel Street 42-52 Willis Street Private Bag 92208 Christchurch 8011 Private Bag 39806 Auckland 1142 New Zealand Wellington Mail Centre New Zealand Toll Free: 0800 854 854 Lower Hutt 5045 Toll Free: 0800 283 269 New Zealand Toll Free: 0800 283 269 This document has been produced by Bank of New Zealand (BNZ). BNZ is a registered bank in New Zealand and is only authorised to offer products and services to customers in New Zealand. Analyst Disclaimer: The Information accurately reflects the personal views of the author(s) about the securities, issuers and other subject matters discussed, and is based upon sources reasonably believed to be reliable and accurate. The views of the author(s) do not necessarily reflect the views of the NAB Group. No part of the compensation of the author(s) was, is, or will be, directly or indirectly, related to any specific recommendations or views expressed. BNZ maintains an effective information barrier between the research analysts and its private side operations. Private side functions are physically segregated from the research analysts and have no control over their remuneration or budget. The research functions do not report directly or indirectly to any private side function. The Research analyst might have received help from the issuer subject in the research report. New Zealand: The information in this publication is provided for general information purposes only, and is a summary based on selective information which may not be complete for your purposes. This publication does not constitute any advice or recommendation with respect to any matter discussed in it, and its contents should not be relied on or used as a basis for entering into any products described in it. Bank of New Zealand recommends recipients seek independent advice prior to acting in relation to any of the matters discussed in this publication. Any statements as to past performance do not represent future performance, and no statements as to future matters are guaranteed to be accurate or reliable. Neither Bank of New Zealand nor any person involved in this publication accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this publication. USA: If this document is distributed in the United States, such distribution is by nabSecurities, LLC. This document is not intended as an offer or solicitation for the purchase or sale of any securities, financial instrument or product or to provide financial services. It is not the intention of nabSecurities to create legal relations on the basis of information provided herein. www.bnz.co.nz/research Page 5
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