APAC Morning Update - 24/03/21

The NZDUSD opens at 0.6996 and the AUDUSD opens at 0.7641

The Kiwi has been smacked lower as the Government announced a range of measures to curb housing yesterday. It wasn’t a knee jerk reaction, but the more and more the market digested the news, the more the Kiwi sold off. The main change going forward is that investors in property will no longer be able to offset their interest expense against their rental income. This is a pretty big change generally, but it also has ramifications for the RBNZ- and by extension the NZD. Remember the RBNZ now has to take into account house price inflation, which put them in a pretty tough spot. They could not drop interest rates further, or keep them as low for as long as this would help fuel house price growth. However, now that the Government has made its own housing tweaks, this effectively greenlights the RBNZ to focus more on price stability and full employment. This allows them to at the very least keep rates lower for longer, and even starts to creak the door open on negative rates again. It is this line of thinking that has frightened the Kiwi off the cliff, and Kiwis aren’t renowned for their flying skills…

More globally there is a risk off theme permeating the markets. There are fears creeping in of a third wave, and this is natural that there would be an uptick as people relax due to vaccinations being on the near horizon. For now the first order reaction is to hit the big sell button on everything, but I think in the near future the response could become a bit more nuanced. A third wave is not going to affect everyone equally, and the higher proportion of the population that is vaccinated, the better they will do. Therefore you would expect places like the UK and USA to bounce back quicker, and places like Europe to get hit relatively harder.

Global equity markets are mixed: Dow -0.9%, S&P 500 -0.8%, FTSE -0.4%, DAX +0.0%, CAC -0.4%, Nikkei -0.6%, Shanghai -0.9%.

Gold prices are off 0.7%, currently trading at $1,727 an ounce. WTI Crude Oil prices are hit hard off 6.3% trading at $57.7 a barrel.

AUDUSD 0.7641 -1.5%
AUDEUR 0.6447 -0.7%
AUDGBP 0.5555 -0.7%
AUDJPY 83.00 -1.6%
AUDNZD 1.0904 0.9%
GBPAUD 1.8001 0.7%

NZDUSD 0.6996 -2.5%
NZDEUR 0.5906 -1.7%
NZDGBP 0.5088 -1.7%
NZDJPY 76.12 -2.5%
NZDAUD 0.9155 -1.1%
NZDCAD 0.8796 -2.0%
GBPNZD 1.9654 1.8%