Markets await Fed signals, Trump reactions; US PPI rises, Chinese buy real estate faster; AU banks clamp down on investor lending; Aussie power situation gets messier; UST 10yr yield at 2.59%; oil down, gold up; NZ$1 = 69.3 US¢, TWI-5 = 74.9

Markets await Fed signals, Trump reactions; US PPI rises, Chinese buy real estate faster; AU banks clamp down on investor lending; Aussie power situation gets messier; UST 10yr yield at 2.59%; oil down, gold up; NZ$1 = 69.3 US¢, TWI-5 = 74.9

Here's my summary of the key events overnight that affect New Zealand, with news markets are in a holding pattern.

All eyes are on the US Federal Reserve. Not only does 'everyone' expect a rate hike tomorrow, the talk is all of the 'dot plot' guidance and expectations are rising that it will show a regulator ready to hit the accelerator. The jobless rate is already below their target and inflation signals are at levels they weren't expecting until year end. (Actually, this meeting will be a physical challenge for participants because of a major snowstorm in Washington.) Despite the certainty of a hike, the uncertainty of the extent of the guidance has markets on hold.

And there is the added uncertainty of what the Trump administration will do with a Fed that seeks to raise rates faster. The Fed's independence is in the balance.

But the overnight signals were clear. American producer prices rose more than expected in February. The cost of services pushed higher and the year-on-year gain was the largest in nearly five years, pointing to steadily rising inflation pressure.

In China, investment in real estate is growing at its fastest pace in 2 years, despite the official focus on restraining it. By any measure, the Chinese government is failing to control the people's impulse to 'buy property' no matter what it takes.

In Australia, some banks are moving to raise deposit requirements even further for housing 'investor' loans on top of other recent moves like rate premiums. Restrictions on negative gearing are also announced. And most other banks look like they will follow these new moves. These shifts come as banks see renewed demand from this segment and are approaching their 'speed limits' for investor lending set by APRA.

And in South Australia, their state government has struck out on its own energy-crisis solution path. It will spend AU$0.5 bln to take control of state's energy market, build and run a gas-fired power plant and commission Australia's biggest battery as it struggles to secure a stable energy supply in the state. But the Federal government is not impressed with moves that lack co-ordination and it says will raise prices for consumers. A big mess just got messier.

In New York, the UST 10yr yield is slipping today and is now at 2.59%.

Oil prices are down again today and now just over US$47.50 for the US benchmark, while the Brent benchmark is just over US$50.50 a barrel. And this is despite OPEC's supply restraint and a shift up in demand. Stocks are just too high. And there are rumours Saudi Arabia has started pumping again at pre-restraint levels.

The gold price is slightly higher, up +US$2 to US$1,205/oz.

And the New Zealand dollar is also marginally firmer at 69.3 USc. On the cross rates the Kiwi dollar is at 91.6 AU¢, and against the euro is at 65.2 euro cents. The NZ TWI-5 index at 74.9.

If you want to catch up with all the 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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5 Comments

another survey where Auckland tops the list, not news to most of us but double g and Zach
Aucklanders stuck in traffic, congestion now worse than Hong Kong
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11818222
I don't believe they have compared apples with apples, hong kong is worse by a long way

Here's a nice timeline of the inaction that leads us to our current situation.

Lets vote them back in this September for their sterling foresight and vision.

http://transportblog.co.nz/2016/02/01/a-brief-crl-history-in-cartoons/

I believe the Tom Tom data measures the added time during rush hour, so if the roads are always busy then that wouldn't show up as bad traffic. That said, I recently had to take a taxi from HK airport to the train station during morning commute time and was pleasantly surprised at how free flowing the traffic was. Certainly better than AK airport to Britomart during morning rush.

All eyes are on the US Federal Reserve. Not only does 'everyone' expect a rate hike tomorrow, the talk is all of the 'dot plot' guidance and expectations are rising that it will show a regulator ready to hit the accelerator. The jobless rate is already below their target and inflation signals are at levels they weren't expecting until year end.

Yeah right!!!

Is raising the federal funds rate truly equivalent to tightening? The answer is emphatically, unequivocally no. Read more

It is bizarre that gas customers in Japan buy Australian gas more cheaply than Australians. Some of this gas is drilled in the Bass Strait, piped to Queensland, turned into liquid and shipped 6,700 kilometres to Japan … but the Japanese still pay less than Victorians.

http://www.michaelwest.com.au/gas-the-crisis-of-guile-and-greed/