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90 seconds at 9 am: Markets expecting OCR hikes; Dairy prices rise, especially cheese and butter; IMF raises growth forecasts; more Fed tapering due; NZ$1 = US$0.831 TWI = 78.9

Posted in News
See video

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of rising dairy prices

Yesterday's December inflation data has reset expectations about interest rate movements in early 2014.

While the CPI data itself was not a big mover, it was higher than expected and the details have convinced markets that the RBNZ foreshadowed rises of about 1.25 over all of 2014 will actually occur and start quite soon.

Swap rates reacted almost immediately. They start today even flatter that they have been with one to three year rates up 6 or 7 bps and four and five year rates up 3 or 4 bps.

ANZ is calling for an OCR hike next Thursday. They join HSBC. Others remain more cautious but see it as a realistic possibility.

While we are not expecting any immediate term deposit or mortgage rate action before then, a bit bizarrely perhaps, this morning Westpac cut 10 bps off its one year fixed mortgage rate for high equity home loans.

Overnight the globaldairytrade auction results were out, cementing in a gain of 1.4% from the previous event. In NZ$, this gain was 1.1%. It's the highest this index has been since April 2013. The really big gainers were for butter and cheese which each rose +10% in two weeks, areas Fonterra is strong in. Milk powders were basically unchanged.

Internationally, the IMF has raised its growth forecast for 2014, just the latest of these types of organisations to do so.

(Bill Gates has said overnight that we are missing some key progress on poverty: by 2035 no nation will be as poor as any of the 35 that the World Bank now classifies as low-income, even adjusting for inflation. "The facts are on the side of the optimists," he said.)

In late trade in New York, equities are holding the near-record levels, oil is up (both WTI and Brent), and gold is lower. Markets are now expecting more Fed tapering.

The NZ dollar starts today up on the RBNZ rate hike expectations at 83.1 USc, 94.3 AUc and the TWI is at 78.9.

If you want to catch up with all the changes on Tuesday, we have an update here.

The easiest place to stay up with today's event risk is by following our Economic Calendar here »

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Just a couple of comments I

Just a couple of comments I have picked up this morning while checking the exchange rate.
"Interesting comment from London banki trader this AM.."over the last wk NZD trading has become more fractuous and liquidity looks dreadful" "

"Big option expiry interest in Kiwi at NY Cut today. A little over 1.5 yards between .8270 and .8315."

Please can you explain this

Please can you explain this and what it means for us??

"The New Zealand Dollar is

"The New Zealand Dollar is often called the 'Kiwi', as the $1 coin depicts the kiwi fruit that New Zealand is often associated with. The New Zealand Dollar has consistenly been one of the top 10 most-traded currencies in the world, and interest rate differentials after the financial collapse have helped the currency to remain popular amongst Forex traders."
From the same site ....   ha ha didn't realise that about our $1 coin.

thanks, for the

thanks, for the site...sounded like you were the piss

Maybe OCR cuts in NZ after a

Maybe OCR cuts in NZ after a couple of attempts at hikes? Like last time.
Hopefully we dont need a major earthquake for commonsense to prevail!

I think that's how it will

I think that's how it will go, aka Sweden.

Is Fonterra considering

Is Fonterra considering farming in Chile?  Michael Spaans in the Fonterra candidate meetings was syaing he believes Fonterra should be getting more involved in South America.  He is a director of this company - is this what we want NZ farming to be considered as 'good practice' overseas?