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US July CPI result stays high but equity markets bet it will allow a Fed rate cut; US Federal deficit swells; India inflation falls; RBA cuts; UST 10yr at 4.29%; gold and oil soft; NZ$1 = 59.6 USc; TWI-5 = 67.2

Economy / news
US July CPI result stays high but equity markets bet it will allow a Fed rate cut; US Federal deficit swells; India inflation falls; RBA cuts; UST 10yr at 4.29%; gold and oil soft; NZ$1 = 59.6 USc; TWI-5 = 67.2

Here's our summary of key economic events overnight that affect New Zealand, with news inflation is staying high in the US but retreating in India and Australia.

The US CPI inflation rate remained at 2.7% in July, the same as in June and below forecasts of 2.8%. Still it is worth noting that June's level caused Trump to fire the bearer of that news. But the level has been held anyway. Food prices also were steady at +2.9%. Meanwhile, core inflation, which excludes food and energy, accelerated to a five-month high of 3.1%, compared to 2.9% in June and above forecasts of 3%. The monthly core CPI went up +0.3% as expected, its sharpest rise in six months.

Apparently, importers were still absorbing most of the border tariff taxes.

The new head of the agency responsible for this data (a Heritage Foundation official) has suggested they stop publishing monthly jobs data, especially for jobs, until "errors can be corrected". (Code for, what the White House wants.)

What today's inflation data means for a Fed rate cut is still uncertain - for some. Equity markets are betting this "as expected" result will allow one and their bets are now 90% certain a cut will come on September 18 (NZT). Bond markets are a bit more sceptical. Currency markets remain bearish on the USD.

Record expected corn production in the US, and closing international appetites for politicised trade uncertainties brought a swift fall in corn prices. The same USDA WASDE report says beef prices are rising in lower tariff-induced imports from Brazil and lower domestic production. US milk prices are little-changed but they expect to import more SMP.

The US NFIB Small Business Optimism Index rose in July from June but it still not back to levels of earlier in the year. This latest rise is all about current outcomes rather than future conditions. The uncertainty subcategory was still high and rising.

The US government posted a -US$291 bln budget deficit in July, despite a +US$21 bln boost in border tariff collections from importers, as spending outpaced revenues. The shortfall was US$47 bln larger than a year earlier, with receipts rising +2% to US$338 bln but outlays jumping +10% to a record US$630 bln for the month. The unexpected worsening seems to have been ignored by equity markets who 'liked' the inflation result.

But the bond market is bracing for the impact of an additional US$500 bln in Treasury Bond issuance over the next six months. Benchmark yields rose.

In Canada, a sharper than expected fall in Vancouver multi-unit house building permits, along with a sharper than expected fall in Toronto commercial building, has seen the Canadian building permit levels in June retreat much more sharply than expected. This retreat comes after an unusually strong gain in May however.

In India, CPI inflation is retreating rapidly now, coming in July at only 1.6% from a year ago. In june it rose 2.1%. The July level is almost as low as the all-time low of 1.5% in June eight years ago. In the latest data, food prices deflated -1.8% and this was by far the major reason for the overall easing. The result is now well below the RBI inflation tolerance band of 2-6% so official rate cutting may come into play. But arguing against that is the record weakness on the Indian rupee.

In Germany, ZEW Indicator of Economic Sentiment fell back for the first time in four months, mainly on the disappointing outcomes in the EU-US tariff 'negotiations'. But overall sentiment remain relatively high there in a long term perspective.

In Australia, and in a unanimous decision, the nine member Reserve Bank of Australia Monetary Policy Board has cut its cash rate target by -25 bps to 3.60%, saying a further easing of monetary policy is appropriate after a pause at its last review in July. Most banks announced they would pass it on in full to home loan borrowers. Lower inflation tracks are behind the official rate cut.

The UST 10yr yield is now at 4.29%, up +2 bps from yesterday at this time. The key 2-10 yield curve is very much steeper at +57 bps. Their 1-5 curve is less inverted at -8 bps. And their 3 mth-10yr curve is also less inverted at -2 bps. The Australian 10 year bond yield starts today at 4.26% and unchanged. The China 10 year bond rate is up +2 bps at 1.73%. The NZ Government 10 year bond rate starts today at just under 4.43% and down -1 bp.

Wall Street is up +1.1% in Tuesday trade on the rate cut hopes. Overnight European markets were generally little-changed, except Paris which ended up +0.7%. Tokyo ended its Tuesday session up another strong +2.1% to a new all-time record high. Hong Kong ended up +0.3% and Shanghai was up +0.5%. Singapore however ended down -0.3%. The ASX200 ended its Tuesday session up +0.4%. But the NZX50 dived late in the session to be down -1.2% at the end.

The price of gold will start today at US$3,347/oz, down -US$7 from yesterday.

American oil prices have softened -50 USc to be just under US$63.50/bbl with the international Brent price now at US$66/bbl.

The Kiwi dollar is at just under 59.6 USc and up +20 bps from yesterday. Against the Aussie we are up +10 bps at 91.2 AUc. Against the euro we are down -10 bps at 51 euro cents. That all means our TWI-5 starts today at just on 67.2, unchanged from yesterday.

The bitcoin price started today at US$119,329 and down -0.2% from this time yesterday. Volatility over the past 24 hours has been low at +/-0.7%.

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39 Comments

Well said Chloe Swarbrick.

I am no supporter of current Green style, never been a member - but she just stepped into a vacuum. We have to ask why that vacuum? Who is doing the vacillating, or the stonewalling? The world has spoken - including inside Israel. 

Spineless is an apt description - doesn't bode well where the world is headed. 

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Chloes' (well) paid by NZdrs to focus & fix NZs problems, not grandstanding for the rest of the world.

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She stepped into a leadership/moral fortitude vacuum. Somebody had to. 

dogs /fleas - just saying

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It's easy to talk when you will never have to deliver or deal with the fallout.

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But she's saying things I agree with, surely she must be good at fixing things.

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There has been a two-state solution on the table for 25+ years. It doesnt help that one side is run by a proscribed terrorist organisation committed to wipe out the other though does it? If Mexican millitary crossed the border and wiped out 1300 innocent Americans, raping and torturing, and taking hostages, I can guarantee you Ciudad de Mexico would look like 1945 Berlin.

I've known this conflict my entire life, grew up on watching at nightly on the news. As long as Palestine are ruled by Hamas there will never be peace, so why recognise Palestine?

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You know there are conditions on the 2 state thing right? 1 of which, I believe, is no Hamas. 

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That's a reasonable condition, most Middle Eastern nations (Egypt, UAE, Jordan, Saudi etc) have banned recognising Hamas and trade openly with Israel. Get rid of Hamas (and Iran) and we can all get behind the two state and push Israel.

I fear it's too late now, Israel will control Gaza for a long time.

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Most probably. 

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Along the way therecwas the occasion of the thwarted visit of Greta that may have  involved her then having a viewing of images of the atrocities by Hamas during their,  let’s say incursion. If so, not sure if that is the reason why Greta has not had much to offer after that as opposed to her broadcasting beforehand.

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I don't think so.

Chloe can virtue signal all she wants.

They oversimplify and it's an issue that has no fix aside from force. What ounce of difference can recognising Palestine have? Hamas with keep being Hamas, IDF will keep being IDF.

 

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Perhaps “gutless” may have been better tolerated. Then again, guess  that would in itself be contradictory to many of the physiques in the round house.

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Perhaps NZ should focus on our own problems, such as the killing of children in care at the rate of 1 every 5 weeks.

We have our own little genocide going on. 

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Well said Chloe Swarbrick.

Come on Power. You know this is performance. Chloe is no martyr for the cause in any meaningful sense. 

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She is having a chickens for KFC moment.

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I would love to see NZ go hard on the Israeli murderers.

But Swarbrick was not kicked out for saying such.  She was rightly kicked out for talking like a dork.

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She was rightly kicked out for talking like a dork.

Aotearoa politics can be quite immature at the best of times. Our parliament has barely progressed from university club rhetoric and antics. That Chloe, Robbo 'rise to the top' are perfect examples of this. 

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You know the Crypto bubble is about to burst when someone at work is encouraging people to put $5k into a local crypto syndicate and that its good because you get free lunches at their meetings. 

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The economy will slow and many people's wealth storage mechanisms will be of little value.

Gonna be a lot of people sleeping on parents couches.

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We are in a decent recession now... next stop is depression

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That's usually the sequence.

Most are still hanging in there though. Employment is still at the high end of the historical spectrum.

A lot will be holding out for Summer.

So if nothing changes, it'll be more serious around next April.

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I am worried that an international event will sweep over us....    we are in a very weak position.

I have noticed an increase in liquidation auctions and bids are lower than last year for equipment like welders, air compressors etc

 

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I am worried that an international event will sweep over us.... we are in a very weak position

Why do you think they're not dropping the OCR that quickly.

Things will get a lot worse. Then they'll start printing money, and the government will start spending.

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I find it amusing that the mood of posters on this site slag off housing as a ponzi but there is positive support for cyrotocurrencies. At least with housing and tulips, at worst one is left with something tangible even if valueless. :)

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People are drawn to crypto because they want the yield, not because of the capital gains......

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?  I don't get that. 

 

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it was quite dry humour

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One and the same

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bravo!

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The actual definition of a ponzi involves an investment vehicle that is illusory, paying out existing investors from the funds of new investors.

I'd rather collect cars than digital money. At least if the market shits the bed I can still take it for a blat.

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You cannot eat Gold......    Fiat has been the next big Ponzi since the USD came off the gold standard.

 

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The gold standard was fairly dead by WW1. And gold markets are prone to manipulation, like any other.

Hard currencies don't really work very well in practice. For a start, the value fluctuates greatly, relative to the cost of goods.

Something like FIAT is actually better as "money", because it's value is somewhat tied to the value of goods and services. Obviously though, it's not immune to mis-use.

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This I gotta see - where did you find this??

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Literally someone asked me at my office if I wanted to buy in. 

I neglected to get the details of the offer.

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"...someone at work is encouraging people to put $5k into a local crypto syndicate and that its good because you get free lunches at their meetings"

That reminds me of the first half of 1987...workplace sharemarket clubs

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You know the Crypto bubble is about to burst when someone at work is encouraging people to put $5k into a local crypto syndicate and that its good because you get free lunches at their meetings

Not so long ago we would celebrate our house prices appreciating $1000-2000 a day. Now we're doing similar with our crypto portfolios. 

Swings and roundabouts?

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Off topic - but has interest.co.nz heard back on their question about why Netflix NZ hasn't filed any financial statements?

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Possibly the same reasons the Privacy Commissioner has a 6 month backlog before it will look at a case.....and perhaps the same reason the Maori party hasn't filed.

We are great at making rules, but very weak at enforcement.

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"Adrian Orr’s Reserve Bank hiring spree unwound, with proposal for 1 in 4 jobs to be cut"

https://www.nzherald.co.nz/business/economy/adrian-orrs-reserve-bank-hi… (paywalled)

https://croakingcassandra.com/2025/08/08/one-in-five-roles-could-go-at-…

 

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