When The Kiwis Speak, It's Worth A Listen...

Last night/ this morning the RBNZ (Central bank of New Zealand) left its interest rates unchanged.  At the last RBNZ meeting in February, the RBNZ expected to leave the short term key rate (OCR: Official Cash Rate) at the current level through 2019 and 2020. The bank stated that the next move could be up or down.

For the casual market observer this seems like a good thing, not worried about inflation, rates at right level which is pretty low historically for NZ, and they give themselves flexibility going forward!

So ALL GOOD?

But in the news release today the RBNZ stated:

Given the weaker global economic outlook and reduced momentum in domestic spending the more likely direction of our next OCR move is down.

That is quite a change in one month, and dovetails with what we have seen from the Fed and other central banks lately.

In addition the RBNZ stated:

The global economic outlook has continued to weaken, in particular amongst some of our key trading partners including Australia, Europe and China.  This weaker outlook has prompted central banks to ease their expected monetary policy stances, placing upward pressure on the New Zealand dollar.

 The balance of risks has shifted to the downside.

 We at Minter like to follow what the smaller countries are saying and doing in terms of monetary policy and how their economies are being affected by the likes of China, Europe and the U.S.

The Bank of Mexico on the 28th and the Reserve bank of Australia on the 2nd will also provide insight on how the global economy is affecting them.

One of the key determinants for the global equity markets is whether we are seeing a dip in global growth and with China being proactive to stimulate combined with the global central banks now on hold, we will experience stronger growth in the later part of 2019?  Or alternatively, the slowdown in the global economy is going to lead the markets into a recession in the early part of 2020?

There is of course the third scenario where global growth ticks along at a slower pace but holds up and the markets avoid a recession.

On the Oil front:

The market is trading pretty well on supply side issues as:

OPEC is coordinated and achieving continued cuts, must be encouraged by price action.

Venezuela, as mentioned yesterday is disintegrating at a rapid rate, it appears that their export levels are close to 0 from a level of1.25 million barrels per day last year.

Algeria is experiencing turmoil as the military is trying to remove the president.

Iran’s ability to export via special waivers from the U.S. will be under review in May and they could be reduced.

The API report highlighted that there has been a large draw on the U.S. crude and gasoline stocks during the past 8 weeks.

WTI has been  gaining on Brent, with the spread trading in the past few weeks.

WTI has outperformed Brent since Christmas by 5%, look for this spread to continue tightening.

USD index bouncing from support level and back to the middle of the range.

S&P: we await a breakout soon

Dax index has broken out of the pattern and we will see if it approaches the 11,480/90 level to sell.

Contact us if you are interested in receiving real time trading signals. In doubt? Check out our track record below!

TickerDate OpenedEntry PriceStopTarget PriceCurrent Price% Change
Long CAMECO (CCJ:xnys)12/0311.9211.2013.0011.88-0,33%
Long Call Option XAUUSD18/0313.0913.45+2.75%
Short Call Option XAUUSD18/035.118.22-60,86%

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– Mark W

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