sign up log in
Want to go ad-free? Find out how, here.

US data weak; China data stronger; EU exits 'lost decade'; Buffett skewers fund managers; UST 10yr yield 1.84%; oil stable, gold up again; NZ$1 = 68.9 US¢, TWI-5 = 72.3

US data weak; China data stronger; EU exits 'lost decade'; Buffett skewers fund managers; UST 10yr yield 1.84%; oil stable, gold up again; NZ$1 = 68.9 US¢, TWI-5 = 72.3

Here's my summary of the key events over the weekend that affect New Zealand, with news the US is using the TPPA to pressure countries it sees as currency manipulators.

But first, the US Fed's preferred measure of inflation (the PCE) barely rose in March as consumer spending remained weak, making it less likely that they will be able to follow through on their projected two interest rate increases this year.

The tame inflation backdrop was reinforced by another report showing only a modest advance in labour costs in the first quarter.

Other data showing a drop in consumer sentiment in April, the fourth consecutive monthly decline, and a softening in factory activity in the Midwest further supported the case for a single rate hike in 2016.

The official factory PMI in China stayed positive for the second month in a row following seven straight months of decline. Their services PMI stayed very expansionary.

India has banned the use of 2 litre diesel vehicles including SUVs in New Delhi as part of a plan to reduce pollution.

In Europe, economic growth is settling in at a low but better level. They are back to where they were before the start of the GFC, the last major economic area to do so. Their 'lost decade' is now behind them, just.

Over the weekend, Warren Buffet launched a broadside at professional fund managers, especially hedge fund managers. He said, “I hope you realise that for the population as a whole, American business has done wonderfully, and the net result of hiring professional management is a huge minus.”

In New York the benchmark UST 10yr yield slipped back and and is now at 1.84%.

But the oil price is unchanged, still just under US$46/barrel in the US, while Brent is now just over US$47/barrel.

The gold price is up sharply, now at US$1,290/oz.

And finally today, the NZ dollar opens at 69.8 US¢, at 91.7 AU¢, and at 61 euro cents. The TWI-5 index is now at 72.3. And over the weekend, the US named a number of countries as currency manipulators. It said the economic and currency policies of China, Japan, Korea, Taiwan and Germany are adding to the global economy’s problems, and these countries need to focus more on creating domestic demand rather than targeting others. It said the new type of trade agreements like the TPPA are a way to hold members to account on the matter.

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

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

Daily exchange rates

Select chart tabs

Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
End of day UTC
Source: CoinDesk

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

20 Comments

A bit of pot-kettle from the US?

Up
0

We all know the system is broken; VERY broken.
This guy sees the initial GFC as a walk in the park compared to whats coming.
https://www.youtube.com/watch?v=BqNE_FYW1JQ&feature=youtu.be
(from http://www.zerohedge.com/news/2016-04-30/nothing-real-its-all-being-pla…)

In Venezuela people are genuinely hungry... In the capital they are living farm more comfortably... Hunger Games anyone.

Up
0

Venezuela - proof positive that communism or at least Chavez's version of it does not, and cannot work!

Up
0

"the economy is ticking along nicely"
Heard that on RNZ 6 O'clock news probably from a bank economist or some other economist who benefits from the status quo?

Up
0

It's just an opinion. What he believes "nicely" is would need to be qualified.

I can confirm my sector of the economy is ticking along nicely but it's only a small part of the total economy. Maybe the economist is referring to the dairy sector and that it's ticking along nicely.

Up
0

That ticking sound is the timer on the bomb!

Up
0

And over the weekend, the US named a number of countries as currency manipulators. It said the economic and currency policies of China, Japan, Korea, Taiwan and Germany are adding to the global economy’s problems, and these countries need to focus more on creating domestic demand rather than targeting others. It said the new type of trade agreements like the TPPA are a way to hold members to account on the matter.

The U.S. Treasury Department, in its semiannual currency report to Congress, was always going to be chasing reality. The EUR/USD, CHF/USD and USD/JPY currency pairs have been signalling a weaker USD since last December. One can only hope the perceived breakout in the Bloomberg Commodity Index will be confirmed and forward inflation indicators make a concerted move to the upside.

Will the power of US control over TPPA cause the RBNZ to pause with cause in respect of the finance minister's crusade to expedite "meaningful" OCR reductions?

Up
0

You gotta laugh - Hardly a week goes by without the US pointing fingers at someone - they who caused the GFC without any help, all on their own - now want to heap the burden on any passerby and then blame them for not helping

Up
0

Qudos to David for that link
https://www.treasury.gov/resource-center/international/exchange-rate-po…

Treasury are pretty clear they have been threatening China, Germany, Japan, Korea and Taiwan over recent months. They use the word "aggressively". That is extraordinarily strong language in an official document.

The President has been clear that no economy should grow its exports based on a persistently undervalued exchange rate, and Treasury has been working aggressively to address exchange rate issues bilaterally, including through the U.S.-China Strategic and Economic Dialogue, and multilaterally through the G-7, G-20, and the International Monetary Fund. This strategy has produced results. The United States has secured commitments from the G-20 member countries to move more rapidly to more market-determined exchange rates, avoid persistent exchange rate misalignments, refrain from competitive exchange rate devaluations, and not target exchange rates for competitive purposes.

Through Treasury’s leadership, the G-7 member countries, including Japan, have publicly affirmed that their fiscal and monetary policies will be oriented toward domestic objectives using domestic instruments. Treasury has also pushed for stronger IMF surveillance of the exchange rate policy obligations of its members.

There was a rumour that the reason the JPY went up after NIRP was because the US was furious about Japan not getting prior approval. To what extent are governments able to control forex markets? Is it all bluster or is there real power being wielded behind the scenes?

Up
0

There was a rumour that the reason the JPY went up after NIRP was because the US was furious about Japan not getting prior approval. To what extent are governments able to control forex markets? Is it all bluster or is there real power being wielded behind the scenes?

I think it's a fact: U.S. Treasury Secretary, Japan Finance Minister Clash on Yen Policy - linked from this article.

Up
0

How does this stuff work? If the US trade deficit goes down then there are fewer USDs going out to allow payment of interest and principle on USD loans - forcing the USD up and leading to defaults. Is that really what they want? Or are they kidding themselves that the loans can be repaid?

Does this mean a few weeks of weak dollar policy followed by a potent dollar strengthening as defaults cascade?

Up
0

Any amount of USD fungible Eurodollar credit can be created at will in any jurisdiction that is home to a G-SIB. Read more

Up
0

But for some reason it isn't being created. Eurodollar debts appear to be decreasing and are now half way back down to some sort of sanity, if I read that article correctly. This slow debt bubble collapse (proxied by interest rate swaps) is why the global economy is slowing (proxied by China industrial production).

Presumably there is some sort of final resolution and recognition of the last bad debt at some point in the next 2-3 years.

This is all very similar to Fred Harrison's ideas about land price cycles. He suggests an 18 year land price cycle in the US and UK, with the peak followed by four years of turmoil in the banking system; then 7 years of slow expansion and bank balance sheet repair; then a short sharp recession as the final cleansing of the financial system takes place. Once the debts of the last cycle are cleansed (taking 11 years) we then have a strong expansion of credit and land prices for the next 7 years, at which point the peak is reached, both in credit expansion and land price.

Up
0

STOP PRESS (lost in translation)

In February 1965, former French President, General DE GAULLE, predicted, during a press conference, the monetary crisis, the USA have brought the world in today (in that ...they get debt for free at the expense of other countries).

https://www.youtube.com/watch?v=i-g2iGskFPE

Up
0

I read it and the US is hassle Germany for behaving like Germans with their money. They have no need to spend the money and will tend to save (even if it's 8% of the GDP). I suspect if they spent the money they would automatically lose the next election.

Governments do have some power to manipulate but it's often on a tiny scale compared to major market players.

Up
0

It's not about ordinary Germans saving. That is smoke. It is about German policy to keep wages in check allowing profits to flow to the wealthy. If money flows to the ordinary people they will spend more, if money flows to the wealthy they will save more.

Plus Germany enjoys a subsidy from allowing the French to partially steal the Deutschmark and rebrand it the Euro (in return for supporting German reunification). If they still had the Deutschmark it would have gone up.

The two factors have combined to destroy the EU and impoverish Southern Europe. On the one hand European currency is way too strong for the southern Europeans (fond memories of cheap Greek holidays in the days of the drachma) and on the other the German savings were lent out as sub prime and too cheap mortgages and sub prime government loans.

All extremely ironic as Germany became the number one creditor and manufacturer in Europe because of French attempts to weaken them.

Up
0

Yeah that's a bad situation. Profits flowing to the richest doesn't surprise me, and after seeing a talk by the former Greek Finance Minister there are major problems within the EU that are just concealed.

The signs and portents keep cropping up in different places.

Up
0

I fear the US is turning Japanese.

Up
0

The US fears that as well, that drove the increase from ZIRP to 0.25%. They are going to try to slowly ramp up. Getting to 1% is going to take quite a while.

Up
0

This history shows that the currency wars from 2010–2015 proceeded in an orderly way. Each one of the five families got some economic benefit (China in 2010, the US in 2011, Japan in 2013 and Europe in 2015).

http://www.dailyreckoning.com.au/the-new-monetary-accord-no-ones-talkin…

Up
0