Here's my summary of the key events overnight that affect New Zealand.
The Federal Reserve has committed to unwinding its quantitative easing programme, announcing it will start rolling off its US$4.5 trillion balance sheet in October. The move by the world’s most influential central bank marks a clear retreat from the support operations policymakers around the world implemented after the global financial crisis.
Furthermore, the Fed has also kept interest rates on hold, keeping the door open to a further rise this year, three next year, and two in 2019. The Fed has reduced its outlook for inflation, which means it now believes it won’t reach its 2% target until 2019.
Both Hurricane Harvey and a supply shortage have seen US home resales in August fall to a one-year low. The third monthly decline in sales also follows data showing a drop in homebuilding activity, suggesting housing will weigh on the economy in the third quarter. An economist has told Reuters he believes housing is the one area of the economy that hasn’t fully recovered from the recession.
Over to the UK, sterling has jumped on the release of data showing British retail sales surged unexpectedly in August. At 1%, the monthly pick-up was the fastest it’s been since April and above forecasts of 0.2% growth. The data puts pressure on the Bank of England to lift interest rates.
The Reserve Bank of Australia has come out saying opaque home loan pricing is an ‘impediment’ to competition. It says banks offering cut-price home loan interest rates through unadvertised discounts, stifles competition because it leaves customers unaware if they are getting a good deal. The RBA also backs the view of smaller banks that their higher funding costs have constrained the intensity of competition since global financial crisis. This funding advantage enjoyed by the major banks has diminished recently because of measures including a major bank tax.
In New York, the UST 10yr yield is stable at 2.24%.
The price of crude oil has risen to just over US$50 a barrel, while the Brent benchmark is just over US$56.
The price of gold has slipped again to US$1,301/oz.
The New Zealand dollar has made some solid gains overnight to 73.3 US cents, 91.7 AU¢, and 61.8 euro cents. The TWI-5 index has risen to 75.6.
Last night’s political opinion poll, putting National ahead of Labour, saw the NZ dollar jump, but the Fed’s announcement dented this strength. Looking forward, ANZ economists expect the market to remain more attuned to the Fed, with any NZD strength being dampened by the central bank’s moves.
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 ».