US Fed declares GFC victory, signals two more 2018 rate rises; US PPI rises faster; ECB response on watch; VW given huge fine; UST 10yr at 2.98%; oil up and gold unchanged; NZ$1 = 70.1 USc; TWI-5 = 73

Here's our summary of key events overnight that affect New Zealand, with news the US Fed has adopted a more hawkish tone.

The US Federal Reserve has issued a short statement today announcing a +25 bps rise in its policy rate. The new rate range is 1.75% to 2.00%. The statement might have been short but it was a sort of victory statement saying it is meeting its inflation and full employment mandates and that the prospects are that this situation will endure. The rate increase was widely expected. Also expected was the changed emphasis, dropping its crisis era wording. The stage is now set for more rate increases, and they may come at a faster rate. In fact, the Fed's dotplot is now for four rate rises in 2018, up from three. We have had two so far (March and June), so another two this year are now expected.

The actual rates American consumers are paying for credit have been rising as the Fed hikes have come through. And they will likely rise further now.

And underscoring the rising price background, data out today for US producer prices records them rising at the rate of +3.1%. That is their fastest rate of increase since January 2012.

Meanwhile in Frankfurt, they are on watch for the ECB rate review decision (tomorrow). The ECB is expected to signal that their €2.6 tln QE program will start winding down, and the details of how they plan that are eagerly awaited.

In Germany, their courts have imposed a €1 bln fine on VW for their use of diesel-cheat software and their management's response to being caught out.

Given the locking in of higher US dollar interest rates, we will need to keep an eye on how that affects emerging markets. It might not be pretty.

The UST 10yr yield is up at 2.98% following the upbeat Fed statement. The Chinese 10yr is at 3.71% (up +2 bps) while the New Zealand equivalent is now at 3.03%, up +2 bps.

Oil prices are up a little today and now just over US$66.50/bbl. The Brent benchmark has followed to just over US$76.60/bbl.

Gold is unchanged at US$1,295/oz.

The Kiwi dollar will start today unchanged at 70.1 USc. On the cross rates we are however a bit firmer at 92.7 AUc, and 59.5 euro cents. That keeps the TWI-5 at 73 and still in its very tight June range.

Bitcoin threatened to go under US$6,000 earlier this morning but has since recovered somewhat and is now at US$6,297 which is -6% below the price at this time yesterday.

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