Here's my summary of the key issues from overnight that affect New Zealand, with news markets haven't reacted too severely to the Reserve Bank cutting interest rates for the first time in four years, yesterday.
The 25bp drop in the Official Cash Rate, to 3.25%, has only seen the dollar weaken slightly in the currencies market. While the cut reflects a change in sentiment, it means someone with a $200,000 mortgage, on a 25-year term, will only save about $7 a week.
The International Monetary Fund has quit talks with Greece, and the European Union's told the Greek prime minister to stop gambling with his cash-strapped country's future and make the decisions needed to avert a devastating default. The IMF says it's made no progress narrowing its differences with Greece. It says it's a long way off reaching an agreement to unlock aid before the end of the month, when Greece is otherwise set to default on a 1.6 billion euro repayment to the IMF.
The People's Bank of China has lowered its full-year growth forecast, as the economy's performance has been weaker than expected. It's cut its GDP growth forecast slightly, downgraded its inflation expectation from 2.2% to 1.4%, and cut its export growth forecast from 6.9% to 2.5%. The Bank's optimistic things will pick up once the economy starts reaping the benefits from its policies towards the end of the year.
New data shows the US economy is gathering steam. US retail sales jumped in May, with the highest surge in imported petrol prices since March 2012, not stopping shoppers. While applications for new unemployment benefits are up, the labour market's still tightening. This could prompt the Fed to raise interest rates in September.
The Murdoch dynasty is far from loosening its grip on 21st Century Fox. Chief executive, Rupert Murdoch, is planning to hand over the reins to his son James. The 84-year-old plans to become the company's executive chairman. The changes are expected to be discussed at a meeting next week.
The NZD is down about 2¢ against the US from early yesterday morning, to 70 US¢. The dollar's also weakened by about 2¢ against the Australian, to 90.5 AU¢. It's down slightly against the euro, to 62.3 euro cents. The TWI-5 has dropped to 73.8.
There may be some disappointment the dollar's only weakened about a half a percent against the US, and the TWI-5 is only down 1.6%, from this time last week.
In New York, UST 10yr benchmark yields have dropped to 2.42%.
Rate curves in New Zealand have steepened sharply. The 1-5 curve is now up 48bp, and the 2-10 curve is the highest it's been in 15 months.
The price of crude oil remains at US$61/barrel, while Brent crude is down slightly from yesterday morning, to US$65/barrel.
The price of gold has dropped $7, to US$1,179/oz.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here »
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22 Comments
Ipso facto....everything! A lower NZ$ not only hits the petrol pump of your car, but the delivery truck to the supermarket and the security van to the bank. A lower OCR feeds through to all household disposable income and whatever 'savings' lower debt costs attract, they are far outweighed by other costs....
Indeed, and exporters (including farmers) and import substituters make more money, as more domestic spending is steered towards their goods. Many imported prices won't kneejerk upwards, as it's a myth that importers, and more importantly their suppliers, have generously passed on all the benefits of our way too high exchange rate over the last few years.
If you had compared the price of equivalent German cars in the UK to NZ over the last few years, you would have seen a 30% difference in price. That gap will now gradually be closing.
In total we now have a chance for our current account to not balloon out.
"Indeed, and exporters (including farmers)"
farmers might won't see a thing however if I had a large multinational country with a base and head office in NZ that had made some really bad decisions and was suffering badly, and I needed to relocate overshore funds to NZ, and my company was in poor condition, then I would be very relieved that the RBNZ is playing ball and giving me some relief otherwise it might be very bad for my staff and shareholders... (as for my suppliers.... who them?)
you make the assumption these things aren't already being done.
It is one of my opinions, and KPIs used, that if you're having to cut things that finely (eg slowing by a future 10% in vehicles, reducing trip by 2km) then you'll dealing with a _really_ rine leel of efficiency (and the overhead to clculate it...) But if you're needing that level of efficiency in basic operations as a _cost_ measure then your system has already failed and you're just poking the corpse.
so you save 2% on fuel, use 200l a month, thats a saving of 4 liters, not even $10... not even1 hours labour at minimum wage. so unless your process system is using 20,000 l a month it's just not worth the time or effort involved to do it, and if other savings are equally slim then you have to start looking for hidden costs (or "trimming the extra at head office and support functions")
Indeed.
I hope the Greeks stay strong, and not be bullied by the likes of the IMF.
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What's happening in Greece is what the neo-liberals would like to see happen everywhere else in the world....privates everything, pass on the cost to the poor, flood all the wealth to the rich....
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The Greeks are fighting our fight.
This makes interesting reading. http://www.dailyfx.com/forex/technical/ssi/table/2015/06/11/ssi_table_s…
"Subdued reaction", "has only seen the dollar weaken slightly in the currencies market."
Not sure what graph you are looking at but an almost 2c move in the exchange rate in the space of a few minutes certainly got my attention and the Fonterra boardroom would have been agog. That 2 cents adds 20 cents to the milk payout. A few more days like that and the cockies will be swanning into town like the old days.
Whatever - 2 cents in minutes can't be labelled "subdued" / "weaken slightly" surely????
The Trading desks here and elsewhere would have gone mad. There would have been heart attacks.
Indeed one of Interests other sites http://www.interest.co.nz/currencies/75933/nzd-adjusts-quickly-cut-nz-p… described it as "The NZD’s response was abrupt. The NZD/USD dropped like a stone"
Doesn't sound like subdued to me???
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