Wall Street anxious; US consumer spending rises, Canada's housing worries spread; German inflation up; EU sentiment holds; UST 10yr yield at 2.48%; oil down, gold up; NZ$1 = 72.8 US¢, TWI-5 = 78.5

Wall Street anxious; US consumer spending rises, Canada's housing worries spread; German inflation up; EU sentiment holds; UST 10yr yield at 2.48%; oil down, gold up; NZ$1 = 72.8 US¢, TWI-5 = 78.5

Here's my summary of the key events over the weekend that affect New Zealand, with news inflation is up in both the US and the EU.

Firstly in New York, equity markets are down about -1% as they come to grips with having to live with wild policy lurches from an increasingly unstable Federal administration. Enthusiasm is turning to worry. The CBOE 'fear' index has jumped to its highest level in 5 months.

Meanwhile, American consumer spending rose faster in December as households bought cars and the cold weather boosted demand for energy. Spending on personal consumption is up +1.6% from a year ago, up +1.7% excluding food and energy. These are the US Fed's preferred measures of inflation. Combined with the recent rises in wages this is a good sign for Q1 economic growth levels.

In Canada, the official Canada Mortgage and Housing Corporation is reporting problematic housing market conditions nationally for the second consecutive quarter due to overvaluation and price acceleration. Their updated view is based on market conditions in Vancouver and Toronto where strong price growth has been spreading to neighbouring centres such as Hamilton and Victoria.

In Germany, inflation has picked up further in January, hitting its highest level in three-and-a-half years to touch the European Central Bank's price stability target of just under 2%. Interestingly, services and rents are two key categories holding the level back. Most other major components are well over 2%.

Two EU economic sentiment indicators out overnight show positive levels holding for both consumers and businesses. Both measures maintain the steady climb from 2014 lows and are at their highest levels since 2011.

In New York, the UST 10yr yield is marginally lower overnight at 2.48%.

Oil prices are a touch lower today now just over US$52.50 for the US benchmark, while the Brent benchmark is just under US$55.50 a barrel. US domestic rig counts are rising still and output ramping up fast.

The gold price is US$8 higher at US$1,196/oz

The New Zealand dollar is also higher at 72.8 US¢. On the cross rates we are at 96.4 AU¢, and against the euro at 68.2 euro cents. The NZ TWI-5 index is up today at 78.5 to a twenty-one month high.

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

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

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

6 Comments

Comment Filter

Highlight new comments in the last hr(s).

Possibly - hope is eternal.

Nonetheless, it would seem they spend the proceeds of debt (savings) to top up the income gap. HT Peri

Personal income growth disappointed in December, rising a less-than-expected 0.3% MoM. Of course, that did not stop Americans from spending as personal consumption rose 0.5% MoM in December. This is the 9th month in a row of higher annual spending growth than income growth...

Sadly for all those hyping and hoping for wage growth - it is stagnant again...

Which coupled with the rising inflation means real disposable income growth is its slowest since 2015...

But the need to spend, spend, spend, sends the savings rate tumbling to just 5.4% - the lowest since March 2015. Read more

Stephen how was that increase in spending funded? Debt - we know Yanks will borrow to support their lifestyle? (As do most others) The limited growth may indicate some wariness across the sector in the face of rising interest rates.

Graeme Wheeler to make an announcement on his future  as RBNZ Governor 'fairly soon' https://www.bloomberg.com/news/articles/2017-01-30/rbnz-s-wheeler-to-make-announcement-on-future-soon-joyce-says

So it looks like he is going. Pity. I thought that he tried harder than his predecessors, but suspect that he was thoroughly interfered with by the government. It would be very interesting if we are able to hear his comments when he is unencumbered by constraints of his official position.

Appointed in 2012, Wheeler has presided over an economy that has out-performed its developed peers, with growth of 3.5 percent in the year to September. Yet he has failed to meet his inflation target as the strong New Zealand dollar suppressed import prices.

“We are in quite unusual times so people have to, and do, take into account that the New Zealand Reserve Bank is not operating in isolation,” said Joyce. “It’s operating in a context of a world economy that has some rather unusual characteristics to it by historic standards.”

Wheeler has cut his benchmark rate to a record low of 1.75 percent in an effort to revive price pressures.

Hmmmm....

Throughout that year, the outward behavior of monetary authorities in the US was as it always was – comforting, reassuring, and confident. The modern central bank operates in that way regardless of whether there is actually any reason for that projected mood. Based on Japan’s experience with QE in particular, where the FOMC had decided years before that admitting QE hadn’t achieved its goals was part of the reason it hadn’t in Japan achieved its goals (circular reasoning is a common occurrence in monetary Economics under rational expectations theory), therefore as a matter of established policy Federal Reserve officials were not going to do the same thing. Read more