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Two highly unusual things happened on Monday. Oil traded at minus $40 per barrel and the Norwegian krone did not flinch. The first of those was unprecedented; the second was surprising in the context of the first. Sterling stayed out of it and was on average unchanged on the day.

The negative price for West Texas Intermediate crude arose from a combination of excess supply and insufficient storage facilities. It was specific to oil for delivery to Cushing Oklahoma in May: June deliveries are still trading above $21 and Brent crude, the global benchmark, is up at $25. Nevertheless, having happened once, some believe it could happen again in a month’s time for the same reasons, and it does not bode well for the US economy.

The situation sent the US dollar an average of 0.5% higher, an outcome that would once have been described as paradoxical but nowadays looks entirely normal. The dollar’s upward move was helped along by reports that North Korea’s leader Kim Jong Un is unwell and by the US president’s immigration ban. The dog that failed to bark was the Norwegian krone, which has recently been hypersensitive to oil prices. It is unchanged on the day against sterling, the Swedish krona and the Canadian dollar.

 

Kiwi lands

A hero-to-zero performance left the NZ dollar at the back of the bunch with an average loss of 0.7% and a shortfall of a cent and a quarter to sterling. Some of it was the weak sentiment provoked by the crashing oil price, the rest came after the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr said he was open to the idea of monetising government debt.

RBNZ said he would not rule out the Reserve Bank directly lending money to the Government, rather than only buying central and local government bonds on the secondary market (traditional quantitative easing) from other investors. Investors are not altogether comfortable with the idea of central banks printing money to finance government spending. It can go spectacularly wrong if mishandled, as happened in Germany’s Weimar Republic and Mugabe’s Zimbabwe. Monetary financing has been practised by the Bank of England since 9 April.

Across the Tasman Sea Mr Orr’s opposite number at the Reserve Bank of Australia had other ideas. He said in a speech this morning that “we are not buying bonds directly from the government” as part of the monetary stimulus measures. The Australian Bureau of Statistics reported that employment fell 6.0% in the three weeks ending 4 April. Covid-19-related job losses hit the under-20s and over-70s hardest. The Aussie dollar lost half a cent to sterling and fell an average of 0.4% against the majors.

 

Outdated UK jobs data

The UK employment figures released this morning put unemployment slightly higher at 4% in February and showed 12k more jobseekers in March. “The estimates cover the period prior to the implementation of the coronavirus (COVID-19) social distancing measures,” and are therefore not indicative of the current situation.

Also already out this morning are the Swiss trade data, which show yet another surplus in March, and Swedish unemployment, which fell from 8.2% to 7.1% in March. Before lunch ZEW reports on economic sentiment in Germany and the euro zone.

This afternoon brings Canadian retail sales for March and US existing home sales. Tonight Business NZ prints the performance of services index which was expected this morning.

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