Here's our summary of key events overnight that affect New Zealand, with news the US Fed is backing Powell over Trump.
At its latest rate review, the US Federal Reserve has kept its policy rates unchanged. This is on the basis that the US has a low jobless rate and is likely to stay low, and most inflation measures are near its target 2% level. But it did acknowledge that "uncertainties about this outlook have increased". The decision was nine to one, with the dissenter a long-time dove.
Having said that, they did remove the word 'patient' from their Statement, and their dotplot suggests one rate cut by the end of 2020 and none in 2019 - far slower than many observers had been assuming. However, this dot plot is different because the prior one saw more chance of a rate hike in 2020. But if you actually take a look at these two dotplots you might find it hard to conclude a rate cut is a firm part of their thinking.
The US dollar fell. US Treasury bond yields fell. Equity markets moved from negative territory into positive territory in a smallish jump.
Overnight European markets were little changed, although UK equity markets fell on political uncertainty. Yesterday Asian markets were all up strongly.
In Canada, inflation is rising, coming in at 2.4% and well above the +2.1% that markets were expecting.
In China, they are approaching their annual period where banks face seasonal liquidity stresses. But this year, these stresses are magnified by the contagion of a key small bank failure and spillover into the non-bank finance sector. There is a growing sense that Chinese financial regulators are losing control of the situation. If they don't regain it soon and before the annual liquidity squeeze, financial stability in the Middle Kingdom could waiver.
In Australia, the iron ore price just keeps on rising and rising. It is up to over US$106/tonne and that is more than a +50% rise since the start of the year. For months, observers have been saying it can't last and yet it is moving higher relentlessly. Strong Chinese buying is at the centre of this, but Brazilian supply issues are also playing a part. High prices for coking coal are evident too.
The UST 10yr yield is now just under 2.03% and down -3 bps from yesterday. Their 2-10 curve is slightly wider at +24 bps while their negative 1-5 curve is slightly narrower at -23 bps. Their closely-watched 30 day-10yr yield is sharply negative now at -13 bps. The Aussie Govt 10yr is unchanged at 1.36%. The China Govt 10yr is also unchanged, still at 3.26%, while the NZ Govt 10 yr is down -3 bps to 1.62%. We should also note that the New Zealand 1-5 swap curve is almost completely flat at +1 bps.
Gold is up +US$3 today to US$1,349/oz.
US oil prices are softer today as high American inventories overwhelm supply tensions. They are now just on US$53.50/bbl. The Brent benchmark is now at US$61.50.
The Kiwi dollar is firm against a downward adjusting greenback after the FOMC decision, now at 65.4 USc. On the cross rates we have risen too to be at 95 AUc. Against the euro we are up to 58.4 euro cents. That puts the TWI-5 up at 70.3.
Bitcoin is little changed at US$9,140. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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