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Yellen holds, optimistic; Wall Street jumps; US housing data strong, factory data weak; US core CPI rising; China power use rises; UK to tax sugar; UST 10yr yield 1.98%; oil up, gold down; NZ$1 = 66.8 US¢, TWI-5 = 70.6

Yellen holds, optimistic; Wall Street jumps; US housing data strong, factory data weak; US core CPI rising; China power use rises; UK to tax sugar; UST 10yr yield 1.98%; oil up, gold down; NZ$1 = 66.8 US¢, TWI-5 = 70.6

Here's my summary of the key events overnight that affect New Zealand, with news all eyes will be on the NZ GDP data today.

But first, today its all about the US Federal Reserve. Janet Yellen has made no changes to any settings today, but the real signals have come from the Statement and the tone of her press conference. These will shape expectations of what it will do next.

The Fed sees economic activity "expanding at a moderate pace despite the global economic and financial developments of recent months" and an inflation pickup domestically.

There was one Fed member who wanted them to raise their policy rate at this meeting. But they have stayed with the program of only gradual increases in the federal funds rate.

Immediately following the release, Wall Street shifted from negative territory to positive territory.

Separate Fed data shows that February industrial production, and factory capacity utilisation both came in slightly lower than expected and lower than in January.

But building permit data also out earlier today shows a strong +6.3% rise over the same month a year ago. And housing starts are up more than +30% on the same basis.

Her review came after data released that showed underlying American inflation increased more than expected in February to +2.3% as rents and medical costs maintained their upward trend. Petrol prices kept the headline rate low. Those have almost flowed through the American economy now, and in future will be much less of a restrainer on overall price inflation. The Fed may soon be facing inflation well within its target bands and pushing higher.

China announced that electricity consumption rose +4.0% in February, which, given the pace of improvement in energy intensity these days, is probably a good indicator that their +6.5% growth goal is on track for 2016. They have heady growth in generation from wind and nuclear, and significant declines in generation from coal.

In the UK, the government there has unveiled a surprise new tax on sugar. The share price of sugar-drink manufacturers have taken a dive.

Locally, eyes will be on our GDP growth data for the December quarter. Markets are expecting a real growth rate of +2.1% compared with the +2.3% rise in the September quarter. We will have the actual result here at 10:45 this morning.

In New York the benchmark UST 10yr yield inched higher in mid-day trade at 1.98% falling back only marginally after the Fed Statement.

The oil price bounced back a little today and is now at US$38/barrel in the US, while Brent is just on US$40/barrel. Lower than expected US stocks seems to have caused the reassessment. And those inventories are lower because consumption is rising more than expected in the US.

The gold price has slipped a little more and is now at US$1,229/oz.

The NZ dollar has jumped following the Fed Statement. Interestingly, we have jumped against all-comers and not just the US. The NZD starts today at 66.8 US¢, at 89 AU¢, and at 59.8 euro cents. The TWI-5 index is just on 70.6, an impressive 100 pt gain.

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 ».

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3 Comments

NZD back to where it was March 9 , RBNZ selling NZD, one rate cut, dovish statement, dairy milk woes and along comes Janet Yellen and David Chaston regurgitates main stream economic drivel, how many rate rises are predicted now for 2016. No wonder Donald Trump will be the next US president.

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Janet Yellen has made no changes to any settings today...

no business is going to pay labor to do less unless they think that labor will be needed and necessary in relatively short order.

Let her go.

Re: Trump - not so sure.

Without Ohio’s 66 delegates, Trump now faces an extremely difficult path to reach the majority of delegates he needs to avoid a “contested” GOP convention. So the establishment looks like it will win and no candidate will enter the convention with a majority of delegates locked up. So after the first ballot, they are free to vote for whoever the establishment wants. Read more

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Stephen we can only bang our heads so many times.

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