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

US dollar rises on better data; IMF says China's currency now not overvalued; AU BOP deficit jumps; UST 10yr yield falls; NZ$1 = 72.3 US¢, TWI-5 = 76.9

US dollar rises on better data; IMF says China's currency now not overvalued; AU BOP deficit jumps; UST 10yr yield falls; NZ$1 = 72.3 US¢, TWI-5 = 76.9

Here's my summary of the key issues from overnight that affect New Zealand, with news the New Zealand dollar has slipped to its lowest level against the greenback in almost five years*.

But first, there has been a flood of data released in the US after their long holiday weekend. And apart from factory data in the oil patch, most of it was 'as expected' or better.

American durable goods orders fell as expected, mainly because of lower aircraft orders. But excluding the 'transportation' component durable goods orders were up, which was better than analysts were expecting.

Sales of newly-build home rose much more than expected in April, up +7% from March, up +26% above the same month in 2014.

Consumer confidence came in higher than expected in May. The US house price index was also up more than expected. And the giant US services sector continues to expand, albeit at a slower pace.

Markets didn't ignore the weight of this data and the US dollar has strengthened markedly overnight. Equity markets fell as the chances of a Fed rate hike rose.

In China, the IMF has declared that its currency is no longer overvalued. That will shift the debate after almost a decade of criticism of it and its part in the 'currency wars'.

In Europe, there is still no Greek deal. But those talks are now just becoming irrelevant; Greece is bankrupt. For the EU, the ECB and the IMF it is increasingly looking like its 'good-money-after-bad'. Greek voter resistance to reform has ruined them all.

In Australia, they have just reported a big jump in their balance of payments deficit. It was -AU$3.7 bln in the March quarter, a -AU$1 bln jump above the December deficit.

In New York, the UST 10yr benchmark yield is slightly lower and now at 2.16%.

The rising US dollar has affected commodity prices. The US oil markets are much lower with the US benchmark price now at just US$58/barrel again, and Brent crude is at US$64/barrel. But there is more to oil's price decline.

The gold price is a lot lower at US$1,187/oz.

As we noted at the top, the New Zealand dollar starts today very much lower at 72.3 US¢, at 93.4 AU¢, and at 66.5 euro cents. The TWI-5 is at 76.9.

(* It did very briefly slip lower in February this year.)

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 »

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.

44 Comments

Banned TED Talk: ‘Rich People Don’t Create Jobs’ Nick Hanauer

http://www.collective-evolution.com/2013/07/12/banned-ted-talk-rich-peo…

Up
0

Why Bubble Prices In Beef, Poultry And Pork Will Collapse

http://www.forbes.com/sites/thomaslandstreet/2015/03/26/how-to-profit-a…

Up
0

The US may try one or two hikes. Then will need to back off, as other countries have discovered an increased sensitivity to hikes by consumers and borrowers.

Up
0

Forget the sensitivity of consumers and borrowers!
A few misguided individuals; a handful of Central Bankers, thought they could manipulate a free-marketplace that is backed by a global US$100 trillion dollar bond market - one hundred trillion dollars of rate sensitive instruments that fund world commerce have been artificially distorted. What do we think is going to happen when that market is let loose to find it's own feet again? Consumers and borrowers will be insignificant in the grand scheme of a catastrophic realignment of interest rates. More countries than just Greece, Spain and Portugal are going to follow Iceland into failure....
Goldman Sachs appear to have the inside running...again...
"Huge and growing debt – and not enough young working people to pay it down – is threatening to crush the global economy, a Goldman Sachs executive is warning." 26/5/15

Up
0

Money is a proxy/IOU for work/energy, we are at peak production per day (more or less) and its gone by 2050 at best, "not enough young ppl" is minor in comparison.

"catastrophic realignment of interest rates" it wont matter what teh rate is as the above 2 points alone guarantee default on the "capital" let alone the interest.

Up
0

Not enough young people is a result of running out of oil. Available energy per person per year is surely the measure that counts, peaked in 1961.

Up
0

Its an interesting match but I dont think we could say its a link? I cant see how anyway.

Up
0

The Seneca Effect in progress, it plots perfectly. Comes back to what you say all the time, all growth requires energy. That includes population growth, all those people need calories every day. The fact that the rate of growth has been declining for 50+ years says less energy was available from that point on to feed the expanding calorie requirement. Oil extraction has grown, but net per person has been shrinking. I have coined the term "Peak EROI" for that event, although I have seen it used elsewhere since.

Up
0

But finding energy is not consuming energy. We see a rapidly rising oil price causing a decline in population growth, we certainly get a decline in the rate at about the right time,

http://en.wikipedia.org/wiki/Population_growth

Hmm still not convinced on your position so many factors.

Up
0

Probably two years ago now that I downloaded the population data from the US Census Bureau in excel form. It shows the population growth peaking at 2.2 in 1962, since then it has fallen every year. You have a good logical mind so put that in context. Plot it and it become an inflection point on a curve. To put that in context, a peak is also an inflection point, before you get to a peak you have to have a change in the slope of the curve, 1962 was that change. Peaking isn't just something that will happen, it is a process that is well under way. Put it in another context, the rate of population growth (world) slowing has never happened before. Happens to any biological species when the food runs out.

Up
0

HAHAHAHAHA. Maybe, just maybe, population growth in the U.S. Is slowing because of other factors like...uhm...birth control, more woman in the work force, more woman being educated, and many other social factors. Nah, must be peak energy.

Up
0

WORLD population growth you dick.

Up
0

Don't let him get to you, man, you know he's just a troll.

Up
0

Yeah, there are a few here I don't usually bother to condescend myself to responding to. Interesting how he is now try to undo being a dick, not just that he is wrong and can't comprehend the argument.

Up
0
Up
0

There you go, now you know your problem.

Up
0

He really didnt did he.

Up
0

...I downloaded the population data from the US Census Bureau in excel.. US, not world.

Up
0

Either you're trolling or you didn't pay attention during the 'birds and bees' discussion. I pretty sure Europe has more access to oil and consumes more oil than India and Africa combined, yet which areas have a bigger population? So, no, oil quantity does not translate to population size.

Up
0

The same day the Telegraph ran the Goldman view of things, they also had AEP's view: HSBC fears world recession with no lifeboats left
http://www.telegraph.co.uk/finance/economics/11625098/HSBC-fears-world-…
The article did though explain the last lifeboat:
"HSBC's Mr King says the global authorities face awful choices if the world economy hits the reefs in its current condition. The last resort may have to be "helicopter money", a radically different form of QE that injects money directly into the veins of economy by funding government spending."
I personally do not understand why more countries have not followed this route already; it would have required far lower levels of printing to be effective, but there we go.
A key to get the world out of a funk over time is for current account surplus countries to start consuming more, rather than consuming less as their already heavily indebted customers stop buying their goods. Unfortunately those countries- primarily Germany, Japan, China, Switzerland are so culturally stuck in spending less than they earn, that it will not be an easy turnaround.

Up
0

Political mantra of the right. However never fight a fight if you cant win it springs to mind which is why the rest of what he is saying is grow for ever while ignoring we are on a finite planet garbage.

Up
0

This is a zero bound trap that most haven't considered. The investment world needs growth to support the return on those investments. Growth needs higher interest rates to appropriately expand the money supply to match. Higher interest rates collapse the capital value of the bonds.

Bonds are the safest investment, yeah right.

Up
0

Short term bonds are cash like so I'd suggest they are indeed the best thing I can see to protect your wealth from what is coming. When its here then I can but assume we'll see massive money printing then gold might be the answer, of course Govn's can just then take it off you.

Up
0

"Short term bonds are cash"....around here people seem to think it is property. Agree though, but am thinking on a macro level. There is no way out of this mess and I stand by my prediction that interest rates will continue to fall, or trend, down.

Up
0

The will only do one hike. That should be enough to put uncertainty back in the system and for asset prices to start to fall

Up
0

You are probably right. Despite historically low core inflation, the Hawks will get their way and then we'll be into a Long Depression mk2.

Up
0

Oil companies heading into bankruptcy - kind of strange that they are losing money hand over fist with oil at $60, would indicate something rather profound about their financial model, n'est pas?

http://gulfnews.com/business/sectors/energy/bankruptcies-stack-up-in-th…

''The oil price plunge has triggered a string of bankruptcies, debt defaults and rescue measures to save companies nearing collapse, with almost two dozen oil and gas groups now under stress.
A 40 per cent slide in Brent crude prices from a peak of $115 a barrel last June, has put smaller, cash-strapped producers in financial trouble, according to City analysts, with up to a quarter of a million barrels a day of oil supply at risk of being curtailed.Even after a rebound in prices from January’s lows to about $66 a barrel, there have been “numerous small corporate casualties” across the globe, and especially in the US and Canada, says a report by Bernstein Research. ''

http://www.usatoday.com/story/money/business/2015/05/25/oilprice-dotcom…

''The credit ratings agency also said that even if oil prices rise to $70 or $75 per barrel, the weakest firms probably won't be safe. Debt is piling up and banks are starting to restrict capital to drillers that are in the most trouble.''

Up
0

What is interesting is these oil companies are sheilded to an extent by insurance they took out, and who holds this debt? why the US banks. So some of the losses are being taken by these big banks, but that will end and the pain will be worse if oil has not got back to $80+. Meanwhile OPEC is pumping as fast as it can so $80+ seems a stretch.

Up
0

what is this 'insurance' they took out?

Up
0

http://www.theguardian.com/environment/2015/may/18/fossil-fuel-companie…

According to these two articles, we've some work to do, yet, before we start heading in another direction....

http://www.theguardian.com/environment/2015/may/25/oil-company-bosses-b…

Up
0

We are not doing the work and even if we do it wont support our present global industrial economy, or the present population.

Up
0

yup...

Up
0

"Bear in mind that the whole problem right now is that the private sector is hurting, it’s spooked, and it’s looking for safety. So it’s piling into “cash”, which really means short-term debt. (Treasury bill rates briefly went negative yesterday). "

yes growth and inflation are upon us.....

meanwhile opposing the hawks,

"I [Paul Krugman] don’t see any reason for the Fed funds rate to rise for at least a year, and probably two — which should mean substantially lower long rates even if you expect yields eventually to rise back to 2005 levels. And if we’re facing a Japanese-type lost decade, which seems all too possible, long rates are in fact still unreasonably high."

http://krugman.blogs.nytimes.com/2009/11/20/interest-rates-the-phantom-…

So he's put his "nuts on the line" as it were.

Of course humans are involved so doing teh wrong things is perfectly possible especially if the GOP win control of all the legislative process ie get a Republican President in there.

"And one last point: I just don’t think the inner circle gets how much danger we’re in from another vicious circle, one that’s real, not hypothetical. The longer high unemployment drags on, the greater the odds that crazy people will win big in the midterm elections — dooming us to economic policy failure on a truly grand scale."

Up
0

"I [Paul Krugman] don’t see any reason for the Fed funds rate to rise for at least a year, and probably two

You really need to stop worshipping false gods.

The effective fed funds rate market is dead and the Fed is unable to resurrect unsecured interbank lending - if you had any experience in these matters you would know the eurodollar repo market is the fundamental source of interbank liquidity. Influencing the repo rate is tantamount to changing short end $ credit rates.

I suggest you and Krugman read a little:
http://www.realclearmarkets.com/articles/2015/05/22/the_fate_of_the_fed…

http://www.alhambrapartners.com/2015/05/18/kept-afloat-with-nothing-but…

http://www.alhambrapartners.com/2015/05/22/libor-describes-the-exits/

Up
0

Ive seen "alhambrapartners" work via the "corner" and frankly its while the research/data is Ok, the opinions are full or nutty partisan rubbish. The thing is these and you I think are part of the financial market that is dis-connected from the real world [economy]. By this I mean your financial world is floating on a foundation of quicksand and not only that the few pillars stopping us sinking in are being kicked out by the likes of these bozos. ie the financial markets are more than capable and even wish to put a gun to our collective head (libor freeze up) and then pull the trigger and be happy doing it to "prove they are right" If that isnt a sign of a fanatic/extremist I dont know what is. I really wonder how some ppl think we will eat without banks.

Up
0

As I have said before, don't give up the day job - I have no interest in ideology or partisan statements - I just wish to gauge the true state of liquidity when I place the chips. Moribund price discovery mechanisms are no concern of mine and the same should apply to any other financial practitioner./forecaster.

Up
0

I'm surprised anyone takes any notice of what Krugman has to say. Here's his famous advice from as long ago as 2002 in a New York Times op-ed - "To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." That sure worked out well.

Up
0

sarcasm lost on you? or more like you cherry pick out of context in order to smear.

http://www.cepr.net/blogs/beat-the-press/when-someone-says-paul-krugman…

"The basis for this absurd claim was a 2002 column on the weak recovery following the 2001 recession. The column notes the weakness of the economy at the time (we were still losing jobs 8 months after the official end of the recession) and attributes it to the fact that the 2001 recession was not a standard post-war recession. It was brought about by the collapse of the stock bubble.

For the full sentence without the bits you cut out,

"Krugman then wrote:

"To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

8>

Up
0

And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

I read this as Paul Krugman saying that he ( krugman ) thinks that Greenspan should create a housing bubble....and he simply quotes the Pimco guy to make that point..
How is it smearing someone to quote that...????
Who gives a shit if someone is right wing or left wing... If someones' idea is sound ...then thats' what matters.... ( and we all have bad ideas at times )

Up
0

um no, I certainly do not believe that and the original poster in here was selectively quoting part of the sentence to make it appear it was saying what it was not. interesting just how common such actions are becoming ie make it look like the opposite of what the writer intended.

it is smearing clearly, as this is what the original poster said ie trying to damage someone's reputation by quoting out of context.

But you know its up there now and ppl can read both and believe what they want to believe and I and sure they will, until reality smacks them in the face.

"idea is sound" I totally agree. However we are seeing more and more attacks on ppl who hold opposing views rather than the attacker putting up their own argument. That is not sound.

PS reading the entire original PK post does a lot to clarify the context.

Up
0

oh and from PK himself,

"Update: Krugman responds to call the chatter about this piece:

Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened."

btw, original PK post,

http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html

and,

http://www.dailykos.com/story/2012/06/11/1093969/-Another-Day-Another-S…

so he is warning about what he said they should do? no I think not.

Up
0

steven... " It wasn’t a piece of policy advocacy, it was just economic analysis. "
Yes... I've got it... and agree

Up
0

Currency wars well underway and Dollar being driven higher. Globalists elite corps and China buying up the world cheap before the dollar is dropped and replaced by the new reserve currency coming. This will supposedly be a Bretton Woods type event and is not far off from what Legard and others are pointing to. Suggest research currency reset. If true, explains why they dont care about debt ceilings anymore. Interested to hear peoples comments.

Up
0