APAC Morning Update - 12/02/21

The NZDUSD opens at 0.7236 and the AUDUSD opens at 0.7763

As opposed to the NZD and the AUD, assets are starting to move. In the US house prices are up almost 15% year on year, to a ‘whopping’ USD $315,000, topping the 2005 peak. Few things to note in the above statement. For one, housing apparently can go down and take a while to go back up? Second, let’s compare it to New Zealand’s housing market as an example. According to some slightly out of date data, US GDP per capita is circa US $65k compared to NZ’s circa US $41k. US mortgage rates are comparable, if not lower than NZ, and NZ house prices average, in USD terms, $540,000. If the US house prices were to “normalize” to NZ’s same price to income ratio, then we would see average prices of US $856,000.

Now don’t get us wrong, we are not seriously arguing that there are no difference in the two markets, and that comparing the figures so basically is valid, or that US house prices will appreciate so dramatically. However, what we are arguing is that there seems to be room to run, and US $315,000 seems to be cheap. Now practically, what does this mean if US housing booms, and grows at 15% p/a for the next 5 years? For starters this would be a massive tailwind to the US economy, and would help them bounce back quickly. They are already expected to grow at 6.4%, and if they overshoot that, then that is an extremely high growth rate for such a large country.

The Kiwi is trading very strongly on relative NZ strong performance and US underperformance. We have looked at the Kiwi dropping because of all the negative news out there, but what if instead of dropping on bad data, the Kiwi stays flat but the USD booms? Net effect is the same for importers, but the reasons behind it are vastly different, and not yet priced into the USD.
 
Global equity markets are mixed: Dow -0.4%, S&P 500 -0.1%, FTSE +0.1%, DAX +0.8%, CAC -0.4%, Nikkei +0.2%, Shanghai +1.4%.

Gold prices are up +0.1%, currently trading at $1,836 an ounce. WTI Crude Oil prices are also up 0.5% trading at $58.5 a barrel. 

AUDUSD 0.7763 0.5%
AUDEUR 0.6396 0.3%
AUDGBP 0.5615 0.3%
AUDJPY 81.28 0.6%
AUDNZD 1.0728 0.5%
GBPAUD 1.7809 -0.3%

NZDUSD 0.7236 0.0%
NZDEUR 0.5962 -0.2%
NZDGBP 0.5233 -0.2%
NZDJPY 75.77 0.1%
NZDAUD 0.9321 -0.4%
NZDCAD 0.9173 -0.2%
GBPNZD 1.9115 0.2%