• Ashley Groves

🌎 Toilet paper | Italy | Rates | 3 Things

Updated: Mar 9


March 6th, 2020


Happy Friday!

Did You Know...


Spending a $550M on a presidential campaign, just to pull out after three months is a pretty weird flex. Bloomberg spent over $6M a day and paid $4.8M for each of his 44 delegates. At that rate it would've cost him $9.5Bn to win the 1991 delegates he needed to face Trump.





As you will find out different people have different priorities when it comes to what is most important in moments of mass hysteria. That being said... what are the top panic buy items in the US? (based on sales percentage increase). (Answers below)



AUD


The Great Aussie Toilet Paper Shortage



We are now in our third month of COVID-19 and we think it may be getting to some people. Australia has seen a slight uptick in toilet paper sales. The initial run occurred when rumours started swirling (counter-clockwise of course) that TP imports may be "flushed away" due to the Coronavirus. However this rumour was promptly “squatted on” when authorities assured citizens that the vast majority of toilet paper was made locally. This has done nothing to deter shoppers from “wiping the shelves clean from front to back” forcing major retailers to ration supplies. Radio shows are running competitions, Newspapers are printing extra blank pages and McDonalds have been heavily targeted by loo roll lifters. Nothing like FOMO to create false perceptions.

Australia’s largest producer has upped output by 10% and loo roll alternatives such as Bidet technology companies have seen an increase in sales by over 500%. MGG


FX

The ccy is in the sh*!%er, too, losing 21% of its value in the last two years. The currency may be headed even lower, as the RBA just cut the cash rate from .75% to .5%, an all time low. Their dovish tone hints at another 25 bps cut at their next meeting April 7th.





EUR


Italy struggling to stay afloat




They may have the best pizza and pasta in the world, but that hasn’t stopped Italy being one of the larger casualties of the volatile start to 2020, with the boot nation technically entering into a recession in Q1.

Italy’s poor start too 2020 has a number of global attribution with The industrial sector, as shown by an abysmal PMI, consumer and business confidence is down, and coronavirus (of course) is disrupting supply chains and tourism. Let’s not forget all Serie A soccer matches are being played without crowds until early April. This is big news in Italy considering soccer is a way of life for many.


What's not to like in Italy’s economy:

  • sharpest economic contraction in 7 years

  • public debt an amazing 135% of GDP

  • political and policy uncertainty

  • unemployment one of the highest in the zone (only Greece and Spain are higher)


It’s difficult to see how Italy can pull themselves out of the hole they have found themselves in and is only buoyed by a recent rise in the euro in the past week.


After a multi-year 20% weakening, EUR has posted a 5% gain in the last few weeks.



USD CHF JPY


Central bank slashers




In what's more telling than any politician's cheerleading, central banks are busily slashing rates faster than a horror show. Brazil and Mexico slashed their rates for the 5th consecutive time. so did Argentina . Of course the US FED cut its rate by 50 bps a week ago in the first emergency rate cut since the 2008 crisis. They were not alone though, with the RBA, RBNZ, and BOE all following suit.Traders are expecting more, as interest rate swap markets have priced in 58 more for 2020.This could prove disastrous for EMs, as inflation goes up and currencies weaken. Average real yields have already turned negative in India, Taiwan and Turkey.


FX The JPY has posted a very strong gain of 7% since Feb 20th after trundling along in a channel for months. As a “safe haven” currency, this recent gain is probably on the back of the COVID-19 effects on the WW economy.


At the beginning of December 2019, CHF was at parity with the USD. Since then it has also gained almost 7%, mostly since Feb 20th.


Conversely (perversely), the DXY has weakened in the last few weeks, indicating it doesn't enjoy the same “safe haven” status that CHF and JPY do.


US Dollar Index





CAD GBP EUR AUD NZD ZWL


In Other News


This Weeks Economic Data Calendar



Keep An Eye On Next Week




Feature Article


When is hedging worthwhile? - Decoding risk and forward points




Using forward contracts to lock in a future rate is a common, well-accepted form of risk management. Forward points vary with the currency pair, and losses and gains can be had in differing contracts, however, the big question is: how much loss is too much?... READ MORE


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Quiz of the week


The US shoppers top panic buys by sales increase are:





Oat milk: 441%

Medical masks: 428%

Household maintenance masks: 218%

Thermometers: 43%

Hand sanitizer: 20%

Fruit snacks: 10.4%

Pretzels: 8.2%

Cat food: 7.5%

Sanitary pads: 7%

Health and nutrition bars: 6.6%


Toilet paper is 11th with 5.4%, dog food didn't make the list.

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