Here's my summary of the key issues from over the weekend that affect New Zealand, with news of concerns about policy decision security at the Reserve Bank of Australia.
But first, American home resales volumes rose modestly in February but a persistent shortage of properties on the market spurred the biggest price jump in a year, up +7.5% above the same month a year ago to a median of US$202,600 (NZ$265,000).
Mario Draghi said overnight the ECB will purchase large amounts of public and private debt for at least 18 months and until it is convinced that inflation will stabilize near annual rates of 2%.
But his new bond-buying policy is seeing a 'torrent of cash' leaving Europe and pushing up the US dollar - and the NZ dollar too - and making the debts of emerging economies much harder to repay according to Moody's. The exchange rate shift is much worse for them than the low interest rate advantages.
In Greece, the tragedy rolls on. Greece’s finances have deteriorated as anxiety over whether there will be another bailout and has spurred another spike in bank withdrawals. Tax collections have also plunged, raising questions about whether the new government will be able to pay state workers and meet other obligations. Even as talks go on outside the country, Greece's naive new government is watching the start of a collapse at home.
On a different note, here's something technical to look forward to. Chemists have developed a non-stick coating for the inside of bottles that will allow all the ingredients to flow out without any sticking to the sides. It is a feature that is licensing now and will be in your supermarket quite soon. It is an innovation that will reduce a lot of waste and is another example of relentless productivity.
In New York, the UST 10yr yields were unchanged overnight at 1.93%. The New Zealand swap curve is maintaining its very flat structure.
The crude oil price rose marginally to US$47/barrel and Brent crude is at $55 a barrel. Commodity price movements today were more about the falling US dollar than anything else.
The gold price is holding at US$1,183/oz.
The New Zealand dollar starts today with another jump and we are now up to 76.3 US¢ which is more than 3¢ higher than at the start of last week, it is at 97.1 AU¢, and the TWI is at 80.6.
And earlier this month there was a sudden jump in the Aussie dollar ahead of the RBA’s interest-rate decision and now regulator ASIC is looking for potential sources of a leak of the decision early. The Australian dollar jumped more than 0.6% in the minute before the central bank unexpectedly refrained from cutting rates on March 3. Another rate cut is now being expected by markets.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk is by following our Economic Calendar here »
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18 Comments
NZD/AUD parity by May?, due to the RBNZ persistent high interest rate policy to keep strengthening the NZD.
Any leaking from inside RBNZ would have no influence due to everyone already knowing the consistent direction. High dollar, high interest rates, and banks exerting a hiking pressure/monologue.
Did you know that a staggering 25 Central Banks have cut rates around the globe in the past 60 business days ?
If thats not a Currency War then what is ?
And what are we doing?
In keeping with our fundamenatlly honest, trusting and othordox Kiwi psyche we either stick to our guns or march to the beat of our own drum .
No surprises then .
ECB commits to more printing; cash torrent causes global distortion
Just another consequence of adopting the PhD standard.
"My generation gave former tenured economics professors discretionary authority to fabricate money and to fix interest rates." Read more
It gets a little more tricky when the US Federal Reserve is accused of fabricating the loan growth numbers.
(The) .. very glaring discrepancy between what BofA started experiencing one year ago (when we first noted it) when it comes to loan creation, and what the Fed represents every Friday in its weekly H.8 statement, has never been greater! Read more
Anyone get a sense of Deja Vu ?
The cheap money leaving the Eurozome looking for yield , and ( some of it ) coming here will do one thing , and one thing only......... find its way into residential property in the guise of Fixed Mortgage offerrings .
It will not find its way into the productive economy , it will just push up prices of our passive investments .
The rest is likely to be history repeating itself
More clueless money printing from the Central Banks. Meanwhile the BIS says it's all a crock with multiple unintended consequences - massive distortion in the asset and currency markets.
"The central bank for central banks has some advice for policymakers fretting about deflation: Don't.
In a study bound to prove controversial in the corridors of power and academia, economists at the Bank for International Settlements concluded the connection between economic growth and shrinking prices is weak.
Their number-crunching found that since World War II there were more than 100 years of short-term deflation across 38 economies studied, yet the average growth rate in those periods was higher than otherwise at 3.2 per cent versus 2.7 per cent. When inflation was more long-lasting, average growth was 2.1 per cent."
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=114…
Greece needs to face the inevitable ............ get out of the Euro and default
- They can never , ever repay the debt they owe
- Their economy has never been productive enough to sustain this type of debt , and it never will be
- Its a lesson for GERMAN Banks who lent recklessly to the unproductive nation in the first place............., who did they think would pay up if a recession came along ?
- The Greek economy has shrunk to a point of being almost a third world scenario
- Ordinary Greeks are really battling to survive , with massive youth unemployment
- There is no advantage to staying in the Euro common money project
Eurpoean Banks have had 7 years to provision for, and write down, the Greek debts on their books , so the carrying costs should be at Zero or close if prudent banking rules have been applied
The immediate consequnces will be severe , including capital flight ( most is gone anyway ) , markets will reel , Greek banks will collapse , and Greeks who always enjoy raucous and wild protests will take to the streets like never before
They will blame the Germans , and thats okay too .
They just need to get on with it
It seems to me that doing the hard stuff is coming up with a workable solution that will allow Greece to propser / survive. Eurocrats have had 7 years imposing austerity and look where it's got them. I think if you read any article or interview with their finaince minister they are clearly looking for a solution that spreads the pain more evenly (shipping magnates etc) and makes it possible to grow their way out of the problem while also looking at costs, inefficiencies, fraud, governance etc
Continually shafting a people whilst letting the powerful institutions and individuals get a free pass is only going to lead to a collapse and Russia stepping in to assist. We will see how it pans out but don't just swallow the mainstream spin. The evidence of failure of the strategy isclear to see. And when you get 50%+ of young males unemployed it's only going to go one way...
"Chemists have developed a non-stick coating for the inside of..."
Amazing! Imagine that stuff in your gutters or in your petrol tank or even better - in your tub of Hokey Pokey! - No need to try and lick the tub out. Another victory for human ingenuity.
It cant , but it can lose relative value .
In spite of what the anti-american lobby think or wish for , America is still the greatest show on earth, single handedly accounting for a quarter of World GDP .
The open nature of the economy and its flexibility will ensure it keeps that advantage for some time yet
Correct! The US dollar will NEVER collapse so long as the US military is top dog. That ain't going to change for a VERY long time. And before all the 'anti-american lobby' spew silly comments about China, India, etc. Remember that most people in those countries don't even have toilets.
I have just come across this
Move over dollar – Yuan may join IMF’s SDR basket
http://atimes.com/2015/03/move-over-dollar-yuan-may-join-imfs-currency-basket/
A Chinese tremblor may soon rattle the international monetary order and the dollar may never be the same.
Citibank predicts in a recent report that the yuan will be accepted by the International Monetary Fund into its Special Drawing Rights or SDRs – the IMF’s “supranational” global currency, though the yuan isn’t likely to be made fully convertible when the body votes on the matter in November this year.This will be an important step in the direction of the internationalisation of the yuan, says the March 12 Citi report. China’s government has long desired the step and it represents a potentially significant shake-up of the present global monetary order.
Reflecting China’s surging economic clout, the yuan will be the first non-convertible currency used to value the SDRs (the other currencies are the dollar, euro, yen and pound). As Citibank writes: “We may soon be in a world where the (yuan) becomes a reserve asset – which would happen by definition if it becomes part of the SDR – without being freely convertible. In other words, the concept of a reserve asset will no longer be “one size fits all.”
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