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RESEARCH
Markets Today
4 May 2022
Events Round-Up to show the unemployment rate falling to 3.5%, the low
reached ahead of the beginning of COVID19. The
NZ: Building permits (m/m%), Mar: 5.8 vs. 12.2 prev. combination of labour market tightness and inflation at a
forty-year high backs the market’s view of a front-loaded
AU: RBA cash rate target, May: 0.35 vs. 0.25 exp.
tightening cycle to get the Fed Funds rate quickly up
GE: Unemployment rate (%), Apr: 5.0 vs. 5.0 exp through neutral, and this is the message expected at the
EC: Unemployment rate (%), Mar: 6.8 vs. 6.8 exp. FOMC update tomorrow.
US: JOLTS job openings (m), Mar: 11.5 vs. 11.2 exp.
European unemployment data were in line with
GDT dairy auction price index (%): -8.5 vs -3.6 prev. expectations, with Germany’s unemployment rate for April
steady at 5.0%, and the euro area’s unemployment rate for
Good Morning March dropping to 6.8%, its lowest level since the euro
was introduced. The data comes ahead of what is looking
US equity markets remain choppy and currently show a like a very challenging growth period for the region.
modest gain, following a strong late rally yesterday. The US
10-year rate has pushed slightly lower after returning to Yesterday, the RBA joined the policy tightening cycle,
the 3% mark. The AUD has been the best major since this raising the cash rate by 25bps to 0.35%, opting to a take
time yesterday, although the net gain came ahead of a middle ground between the majority who expected a
hawkish policy update alongside the RBA’s first rate hike 15bps hike and the handful that expected a larger 40bps
this cycle. The NZD hit a fresh near 2-year low last night, hike. The commentary around the move was hawkish, with
but now shows a small gain from his time yesterday, while a significant upward revision to inflation projections and
the RBA’s move sent NZD/AUD lower. The GDT auction the Bank signalling that this would require a further lift in
was very weak. interest rates over the period ahead. This was a big
capitulation for the Bank which, for the first time, finally
Equity markets remain choppy, with a strong late rally in recognised what the market saw at least six months ago –
the S&P500 soon after we went to print yesterday, taking that Australia was no different to other countries in facing
the index higher and, the index making further gains significant inflation pressures and that a significant
overnight. In the bond market, brokers report that real tightening cycle was appropriate. It wasn’t that long ago
money investors bought US 10-year Treasuries after they that the RBA thought a rate hike wouldn’t be needed until
reached the 3% mark, and they have traded as low as at least 2024 and only two months ago said it would be
2.91% overnight, currently down 3bps for the day at patient.
2.95%. There may been some squaring up of positions
ahead of the FOMC meeting tomorrow. Even though the market has been well positioned for a
significant tightening cycle, the RBA’s acceptance of this
A lower US 10-year rate has gone against the grain of a flat view was still enough to drive Australian rates and the AUD
Germany 10-year rate, at 0.96%, after it briefly pierced 1% higher. The 3-year bond future is up 13bps in yield terms
for the first time since 2015, and a 5bps lift in the UK 10- to 3.16% since the announcement and the 10-year rate is
year rate, playing catching to global yields after the May up 8bps. The lift in the AUD to just under 0.7150 didn’t last
day holiday. Lower US rate spreads have seen the USD long and it has fallen back to its pre-RBA level of 0.7090.
weaken a little, with the DXY down 0.2%. It could be Still, the AUD has been the best performer over the past 24
another case of some squaring of positioning ahead of the hours, but that reflected gains well ahead of the meeting.
FOMC tomorrow.
NZD/AUD fell from just above 0.91 to just under 0.9040
Economic data released have been second-tier, but getting after the RBA’s announcement, breaking below the 2020
plenty of media attention was the US JOLTS report, which low of 0.9055 to a level not seen since 2018. The cross has
highlighted the strength of the US labour market, with a since pushed higher, to 0.9070. Last night NZD/USD traded
record 11.5 number of available positions while a record at a fresh low just above 0.6410 last night and it has since
4.5m Americans quit their jobs in March. There were 1.9 edged higher to 0.6430.
jobs for every unemployed worker. The data comes ahead
of Friday’s employment report for April, which is expected
www.bnz.co.nz/research Page 14 May 2022
Markets Today
The GDT dairy auction price index plunged 8.5% at the commentary on NZ’s housing market will be interesting
overnight auction, more than the 2-3% expected, driven by amidst steadily falling prices and rising interest rates. NZ’s
falls across all product groups. Skim and Whole milk power labour market reports soon after will be contaminated by
prices fell 6.5%, while butter was the biggest mover, down the impact of Omicron, so the signal to noise ratio will be
12.5%. The price index has now fallen for four consecutive low, but evidence of a tight labour market and rising wage
auctions, taking the cumulative price decline to 13.4% inflation should still come through.
since 1 March. Since that time, the NZD has fallen about
5%, cushioning the blow for prices in NZD terms, and the On global releases, Australian retail sales, US ADP
move comes after an extraordinary surge, so dairy farmers’ employment and the US ISM services index are the key
incomes will remain very healthy this season. Still, NZ’s soft releases. All this comes ahead of the FOMC meeting at
commodities basket has been underperforming Australia’s 6am NZ time tomorrow morning, where a 50bps hike is
hard commodities basket and this has been a key driver of well anticipated and fully priced, and timing will be given
NZD/AUD weakness over recent quarters. on the start of quantitative tightening, expected to begin
soon. There will be more interest in Powell’s Press
Yesterday morning, Finance Minister Robertson delivered a Conference for a sense how rapid the Fed Funds rate might
pre-Budget speech. The key take-out for the market was need to increase and how much beyond neutral it might
some slippage in fiscal discipline, with the Government no have to go in light of recent economic developments.
longer expecting to reach an operating surplus until
2024/25, even though strength in recent fiscal data jason.k.wong@bnz.co.nz
pointed to surpluses coming earlier than previous
forecasts. This suggests a bigger fiscal splurge ahead of the Coming Up
next election and a larger debt issuance programme –
Period Cons. Prev. NZT
adding to the extra debt required as the RBNZ sells its “QE
NZ RBNZ Financial Stability Report 09:00
bonds” back to the government.
NZ Unemployment rate (%) Q1 3.2 3.2 10:45
NZ Employment change (q/q%) Q1 0.1 0.1 10:45
The fiscal slippage didn’t seem to perturb the NZGB
market, with rates up 2bps across the curve, more a NZ QES avg hrly earnings (q/q%) Q1 1.2 1.4 10:45
reflection of global than domestic forces. The 10-rate NZ LCI pvt wages ex o-time (q/q%) Q1 0.7 0.7 10:45
closed at its highest level since 2015 at 3.71%. Swap rates AU Retail sales (m/m%) Mar 0.5 1.8 13:30
were also up 2bps across most of the curve, with the 5- AU Real retail sales (q/q%) Q1 1.0 8.2 13:30
year rate closing at 4.0%, the highest close since the end of AU Home loans value (m/m%) Mar -1.9 -3.7 13:30
2014, although it did trade above that level intraday last US ADP employment change Apr 385 455 00:15
week. The lift in Australian rates since the NZ close could US Trade balance ($b) Mar -107 -89 00:30
impart a further upside bias to NZ rates today. US ISM services index Apr 58.5 58.3 02:00
US FOMC Fed Funds (Upper%) May 1.0 0.5 06:00
The calendar in the day ahead is full. The RBNZ Financial US Chair Powell's Press Conference post-FOMC 06:30
Stability Report at 9am won’t likely be market moving but Source: Bloomberg, BNZ
www.bnz.co.nz/research Page 24 May 2022
Markets Today
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 0.6436 +0.0 0.6411 0.6458 CHF 0.9786 +0.1 S&P 500 4,165 +0.1 -0.7 Oil (Brent) 105.33 -2.0
AUD 0.7094 +0.6 0.7079 0.7127 SEK 9.864 -0.5 Dow 33,207 +0.4 -2.7 Oil (WTI) 102.81 -2.2
EUR 1.0526 +0.2 1.0492 1.0578 NOK 9.390 -0.6 Nasdaq 12,592 +0.4 -9.4 Gold 1868.8 +0.3
GBP 1.2491 -0.0 1.2471 1.2567 HKD 7.848 -0.0 Stoxx 50 3,761 +0.8 -6.0 HRC steel 1370.0 -2.5
JPY 130.17 +0.0 129.70 130.29 CNY 6.609 -0.3 FTSE 7,561 +0.2 8.5 CRB 309.2 +0.3
CAD 1.2840 -0.3 SGD 1.384 -0.2 DAX 14,039 +0.7 -7.9 Wheat Chic. 1047.0 -0.8
NZD/AUD 0.9072 -0.6 IDR 14,501 +0.1 CAC 40 6,476 +0.8 2.7 Sugar 18.62 -1.2
NZD/EUR 0.6114 -0.2 THB 34.38 -0.2 Nikkei 26,819 -0.1 -6.9 Cotton 153.33 +3.2
NZD/GBP 0.5153 +0.1 KRW 1,268 +0.2 Shanghai 3,047 +2.4 -11.6 Coffee 218.0 +1.1
NZD/JPY 83.78 +0.0 TWD 29.54 +0.3 ASX 200 7,316 -0.4 3.5 WM powder 4020 +0.0
NZD/CAD 0.8264 -0.3 PHP 52.44 +0.1 NZX 50 11,676 -0.9 -9.6 Australian Futures
NZ TWI 71.65 -0.1 3 year bond 96.815 -0.19
Interest Rates 10 year bond 96.55 -0.09
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 0.50 1.33 3.09 3.03 USD 2.96 -0.03 NZGB 5 1/2 04/15/23 2.94 0.02 1 year 3.38 0.04
AUD 0.10 0.70 3.10 3.71 AUD 3.40 0.14 NZGB 0 1/2 05/15/26 3.60 0.02 2 year 3.87 0.02
NZD 1.50 2.10 3.90 4.01 NZD 3.71 0.02 NZGB 0 1/4 05/15/28 3.66 0.02 5 year 4.00 0.02
EUR 0.00 0.06 1.01 1.76 GER 0.97 -0.00 NZGB 1 1/2 05/15/31 3.70 0.02 7 year 3.99 0.02
GBP 0.75 1.23 2.28 1.98 GBP 1.96 0.05 NZGB 2 05/15/32 3.71 0.02 10 year 3.98 0.02
JPY -0.03 -0.02 0.10 0.42 JPY 0.23 0.00 NZGB 1 3/4 05/15/41 3.85 0.02 15 year 3.95 0.02
CAD 1.00 1.83 3.19 3.42 CAD 2.95 0.00 NZGB 2 3/4 05/15/51 3.91 0.02
* 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 07:01
Source: Bloomberg
www.bnz.co.nz/research Page 34 May 2022
Markets Today
NZD exchange rates
4/05/2022 7:01 am Prev. NY close 0.67 NZD/USD - Last 7 days
USD 0.6436 0.6434
GBP 0.5153 0.5150 0.66
AUD 0.9072 0.9126
EUR 0.6114 0.6124 0.65
JPY 83.78 83.74
CAD 0.8264 0.8287 0.64
CHF 0.6298 0.6292
DKK 4.5486 4.5551 0.63
FJD 1.3949 1.3975 27-Apr 28-Apr 29-Apr 30-Apr 03-May 04-May
HKD 5.0508 5.0493
INR 49.25 49.18 NZD/AUD - Last 7 days
0.93
NOK 6.0434 6.0757
PKR 119.44 119.26
0.92
PHP 33.71 33.58
PGK 2.2662 2.2655
0.91
SEK 6.3485 6.3798
SGD 0.8909 0.8920
0.90
CNY 4.2532 4.2636
THB 22.21 22.04
0.89
TOP 1.4816 1.4733
VUV 74.17 74.15 27-Apr 28-Apr 29-Apr 30-Apr 03-May 04-May
WST 1.6592 1.6604
XPF 73.10 73.08 NZD/USD - Last 12 months
ZAR 10.1386 10.3673 0.74
0.72
0.70
0.68
NZD/USD Forward Points 0.66
BNZ buys NZD BNZ sells NZD 0.64
1 Month -2.08 -1.48 0.62
3 Months -7.90 -7.00 0.60
6 Months -19.91 -17.47 0.58
May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22
9 Months -32.71 -28.75
1 Year -41.65 -39.15
NZD/AUD - Last 12 months
0.98
NZD/AUD Forward points
BNZ buys NZD BNZ Sells NZD
0.96
1 Month -8.58 -7.40
3 Months -24.50 -22.60
0.94
6 Months -45.21 -40.52
9 Months -59.53 -52.02
1 Year -63.13 -56.87 0.92
0.90
May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22
www.bnz.co.nz/research Page 44 May 2022
Markets Today
Contact Details
BNZ Research
Stephen Toplis Craig Ebert Doug Steel Jason Wong Nick Smyth
Head of Research Senior Economist Senior Economist Senior Markets Senior Interest Rates
+64 4 474 6905 +64 4 474 6799 +64 4 474 6923 Strategist Strategist
+64 4 924 7652 +64 4 924 7653
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
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