Subdued reaction to OCR cut, IMF fed up with Greece, China growth forecasts downgraded; NZ$1 = 70 US¢, TWI-5 = 73.8

Here's my summary of the key issues from overnight that affect New Zealand, with news markets haven't reacted too severely to the Reserve Bank cutting interest rates for the first time in four years, yesterday. 

The 25bp drop in the Official Cash Rate, to 3.25%, has only seen the dollar weaken slightly in the currencies market. While the cut reflects a change in sentiment, it means someone with a $200,000 mortgage, on a 25-year term, will only save about $7 a week. 

The International Monetary Fund has quit talks with Greece, and the European Union's told the Greek prime minister to stop gambling with his cash-strapped country's future and make the decisions needed to avert a devastating default. The IMF says it's made no progress narrowing its differences with Greece. It says it's a long way off reaching an agreement to unlock aid before the end of the month, when Greece is otherwise set to default on a 1.6 billion euro repayment to the IMF.

The People's Bank of China has lowered its full-year growth forecast, as the economy's performance has been weaker than expected. It's cut its GDP growth forecast slightly, downgraded its inflation expectation from 2.2% to 1.4%, and cut its export growth forecast from 6.9% to 2.5%. The Bank's optimistic things will pick up once the economy starts reaping the benefits from its policies towards the end of the year. 

New data shows the US economy is gathering steam. US retail sales jumped in May, with the highest surge in imported petrol prices since March 2012, not stopping shoppers. While applications for new unemployment benefits are up, the labour market's still tightening. This could prompt the Fed to raise interest rates in September.

The Murdoch dynasty is far from loosening its grip on 21st Century Fox. Chief executive, Rupert Murdoch, is planning to hand over the reins to his son James. The 84-year-old plans to become the company's executive chairman. The changes are expected to be discussed at a meeting next week.

The NZD is down about 2¢ against the US from early yesterday morning, to 70 US¢. The dollar's also weakened by about 2¢ against the Australian, to 90.5 AU¢. It's down slightly against the euro, to 62.3 euro cents. The TWI-5 has dropped to 73.8. 

There may be some disappointment the dollar's only weakened about a half a percent against the US, and the TWI-5 is only down 1.6%, from this time last week.

In New York, UST 10yr benchmark yields have dropped to 2.42%. 

Rate curves in New Zealand have steepened sharply. The 1-5 curve is now up 48bp, and the 2-10 curve is the highest it's been in 15 months.

The price of crude oil remains at US$61/barrel, while Brent crude is down slightly from yesterday morning, to US$65/barrel. 

The price of gold has dropped $7, to US$1,179/oz.

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 today is by following our Economic Calendar here »