More carnage in markets overnight with oil and stock prices all falling sharply amid worries that emergency measures by Central Banks will fall short of cushioning the coronavirus blow to the global economy. There is concern that global central banks are reaching the limits of monetary policy adjustments with US rates at 0%, NZ at 0.25%, and the Bank of Japan and ECB both indicating that they are unwilling to further reduce already negative interest rates. With monetary policy tools running out, focus turns towards government fiscal measures, with NZ set to announce phase-one of their plan this afternoon. In currency markets, the US Dollar has continued to come under pressure after yesterday’s 100bps cut from the US Fed, while the NZD has held up reasonably well and is up on most major cross rates.
NZD/AUD Nears Parity
The Kiwi Dollar bounced back from yesterday’s 0.75% rate cut from the RBNZ, and is higher vs most major currencies. Of particular note is the continued strength in the NZD/AUD cross rate which is edging closer to the usually elusive parity level. The Australian Dollar has continued to come under pressure amid plunging global oil prices.
NZ Government to Announce Economic Rescue Plan
At 2pm today the Government will announce its fiscal response package to COVID-19, which is expected to be large and significant. Billions of dollars of extra spending is expected to be announced targeting health, business continuity, and employment measures such as targeted wage subsidies, in an attempt to keep the economy afloat during these difficult times.
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