US labour markets rebound, consumer spending rises; Greece makes serious concessions; EU unemployment high; RBA eyes rate cut; long rates rise again; gold falls; NZ$1 = 76.2 US¢, TWI = 79.7

Here's my summary of the key issues from overnight that affect New Zealand, with news of rising labour costs and falling jobless numbers in the US.

The number of Americans filing new claims for jobless benefits tumbled to a 15-year low last week and consumer spending rose in March, signs the US economy was regaining some momentum after virtually stalling in the first quarter.

Meanwhile, US labour costs rose solidly in the three months to March as wages in the private sector pushed on up a very healthy +2.8% pa, which could put the Federal Reserve back on track to raise interest rates this year.

The job situation is still tough across the Atlantic however, with the EU unemployment rate in March a remarkable 11.3%. It ranged from just 4.7% in Germany to a calamitous 25.7% in Greece. 

Greece's government signaled the biggest concessions so far as crunch talks with lenders on a cash-for-reforms package started in earnest on Thursday, but tried to assure leftist supporters it had not abandoned its anti-austerity principles.

Attention is now turning to the next RBA rate decision. Markets are concerned about a deteriorating economic outlook and a resurgent Australian dollar and they now think that will force their reserve bank to cut interest rates on Tuesday, taking the Australian OCR to an all-time low of 2%.

However, Governor Stevens has a regular habit of doing things differently to 'market expectations' so we will need to wait. But an Aussie rate cut is definitely a strong prospect and that will widen the premium for New Zealand yields.

Back in New York, the UST 10yr benchmark yield rose again today and is now at 2.09%, pushed up by the US labour market data. At the long end, we have seen similar rises in the New Zealand swap markets with our 10 yr swap rate now up to 3.86% In fact our rate curves are steepening fast. Our 2-10 curve is up to +37 bps, its highest this year.

The US oil price is still inching higher, now at US$59/barrel, while Brent crude is also slightly higher at US$67/barrel in trading today.

The gold price however fell sharply to US$1,181/oz.

The New Zealand dollar starts today lower at 76.2 US¢, at 96.4 AU¢, and 68 euro cents. The TWI is now at 79.7.

And finally, for those of you that think the RBNZ should get in there and spend to change the level of our currency, just take note of what the happened to the Swiss. For years they have been actively 'managing' the market for the Swiss franc trying to hold it to where they thought it should be against the euro. Recently they found they could not sustain that cost. But it just got even worse; the true costs are coming home to roost. Think we could afford to play that sort of game, as taxpayers?

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk is by following our Economic Calendar here »