Here's our summary of key events overnight that affect New Zealand, with news an American rate cut soon suddenly looks more likely.
In Washington, US Fed chairman Powell is testifying before Congress. His remarks are being taken that the Fed will do whatever necessary to push back against the economic slowdown underway and that means markets see a rate cut soon, probably at the August 1 meeting (NZT). Equities are rising on Wall Street. The US dollar is falling. Powell also said Facebook's crypto project "raises concerns" and can't be allowed to proceed without changes. And he said he will not quit if the US President tries to force him to - he fully intends to serve out his four year term.
At the same time, the Fed released the minutes of its June meeting. That shows there is disagreement that a rate cut is necessary at this time.
The Bank of Canada reviewed its policy rate overnight and left it unchanged at 1.75%. This was the expected result. But it did bump up its growth forecast for the next three years which wasn't expected. They see inflation at about 2% there.
In the trade war negotiation, the new word is that China has instructed its tech firms not to buy from US suppliers when the US changes its rules to allow such purchases again. There are stress signs in big China tech firms. And it turns out that the US President told President Xi that he would look the other way in Hong Kong. Now the US commitment to 'freedom' is just a bargaining chip.
In staying in China, their inflation rate held unchanged at +2.7% as expected as food prices, especially fruit and pork, keep it elevated. Fruit prices are at a decade high. But the surprise was that producer prices slipped to be unchanged from a year ago. We haven't seen this in almost three years and signals their industry is struggling with soft demand.
In our back yard, concerns are growing that Tonga is deep in hock to China, and that the Chinese are buying off their elite decision-makers.
On Tuesday we noted that in Australia the NAB business confidence index fell sharply giving up its post-election gain. Now the Westpac-MI consumer sentiment index is also sharply down. The drop has been called "troubling" because it comes despite two RBA interest rate cuts and the re-elected Government's AU$158 bln tax-cut package. Consumer confidence is now at a two-year low.
The UST 10yr yield is now unchanged at 2.06% after being a little higher earlier. Their 2-10 curve is now at +23 bps (wider) and their negative 1-5 curve at -12 bps (narrower). The Aussie Govt 10yr is up +3 bps at 1.36%. The China Govt 10yr is unchanged at 3.19%, while the NZ Govt 10 yr is up +1 bp and now at 1.57%.
Gold is up +US$17 overnight to US$1,415/oz.
US oil prices are sharply higher today, up about US$2.50/bbl. They are now just over US$60/bbl. The Brent benchmark is up too, now at US$66.50. US producers are shutting down in the Gulf of Mexico ahead of a storm. And US inventories came in lower than expected last week.
The Kiwi dollar is +½c firmer now at just above 66.5 USc. On the cross rates we are marginally firmer again, now at 95.5 AUc. Against the euro we are up as well at 59.1 euro cents. That puts the TWI-5 up to just on 71.4.
Bitcoin is little-changed today, now at US$12,285. 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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