Market movements well contained with no fresh catalysts to drive price action. US retail sales up modestly, in June as expected. US Treasuries and USD reverse course. Rates slightly higher and USD broadly stronger

Market movements have been modest, with a lack of catalysts to drive significant moves. US equities are showing modest falls, US Treasury yields are a little higher, and the USD is moderately stronger.

There have been no fresh developments in the Middle East, with the US continuing its daily strikes on Iran, targeting sites near the Strait of Hormuz. Iran continues to retaliate with missile and drone strikes directed at US bases in the Gulf region. Reuters reported that Iran has asked its Houthi allies in Yemen to close the Red Sea oil route if the US strikes Iran’s power network. Oil traders are not panicking, and Brent crude has traded in a range of approximately USD84–86 per barrel over the past 24 hours.

US retail sales data were in line with market expectations, with modest gains in June and small net positive revisions. Lower gasoline sales weighed on the headline figure, which rose 0.2% m/m. The ex-autos and gas measure rose 0.4%, while the control group measure, which feeds into GDP, increased 0.5%. Pantheon Macroeconomics calculates that households’ real spending increased at an annualised growth rate of around 2½% in Q2, a marked improvement on the meagre 0.5% expansion in Q1 and slightly stronger than the 2.1% average pace in 2025.

In second-tier data, the positive news was that initial jobless claims remain low, falling 8k to 208k last week, while the Philadelphia Fed’s business outlook index surged to 41.4 in July, its highest level since 2021. Housing market indicators were downbeat, with the NAHB housing market index of homebuilders’ sentiment falling 2pts to 34 in July, matching the lowest level this year, due to elevated borrowing costs and other factors. Pending home sales fell 5.4% m/m in June.

UK monthly GDP was slightly stronger than expected, rising 0.1% m/m in May after declining 0.1% in April, with warmer weather supporting retail sales. On a negative note, industrial production fell 0.5% and construction fell 0.8%.

Following a two-day rally after weaker CPI and PPI data, US Treasuries reversed course and rates are up 1–2bps across the curve. The 10-year yield is currently 4.56%. There was little reaction to hawkish comments from Fed speakers, with rates already a little higher before they spoke. Dallas Fed President Logan, a voter this year on the FOMC, called for modestly higher interest rates, saying they “would better balance the outlook and risks”. Kansas City Fed President Schmid, a non-voter, said his “primary concern is inflation, which is too hot and has been above target for too long”.

US equities are weaker, with today’s iteration of see-saw action in semiconductor stocks acting as a drag. The S&P 500 is currently down ½%, with IT stock underperformance pulling the Nasdaq down 1.4%.

Following the move in US Treasury yields, and after two down days for the USD, the currency has shown a broad, albeit modest, recovery across the board. The NZD is near the bottom end of its daily trading range, near 0.5840. The AUD is back below 0.70, while NZD/AUD is flat around 0.8350. GBP is the weakest of the majors, losing half its gain from the previous session to trade at 1.3470. NZD/GBP is up modestly at 0.4335, while the NZD is flat on the other key crosses.

Domestic rates were lower across the curve yesterday, reflecting a combination of global forces and further short-end retracement after the recent significant sell-off, as positioning becomes more balanced. Rates were down 4–5bps across the swaps and NZGB curves, seeing the 2-year swap close at 3.60% and the 10-year rate at 4.32%.

In the day ahead, NZ monthly CPI figures will allow us to finalise our Q2 estimate, which currently sits at 1.5% q/q and 4.1% y/y. There are only second-tier US economic releases tonight to end the week.

Jason Wong is the senior Markets Strategist at BNZ Markets.