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US Fed on track for two more rate hikes; US home resales fall again, Canada retail sales dip, NAFTA progress; Aramco float collapses; UST 10yr down at 2.82%; oil up, gold unchanged; NZ$1 = 67 USc; TWI-5 = 70.6

US Fed on track for two more rate hikes; US home resales fall again, Canada retail sales dip, NAFTA progress; Aramco float collapses; UST 10yr down at 2.82%; oil up, gold unchanged; NZ$1 = 67 USc; TWI-5 = 70.6

Here's our summary of key events overnight that affect New Zealand, with news two more US rate hikes are still likely this year.

The US Fed upgraded its assessment of their economy in August according to the release of minutes from its last meeting, even as it kept interest rates on hold. It said it still plans to tighten monetary policy at a moderate pace. It signaled it will raise interest rates again in September, and traders are currently pricing in a 94% chance of an increase then and a 65% probability for another move up in December. Those would come after earlier rate hikes in March and June this year, making a total rise of +1% in 2018. The US dollar dipped on the news but the UST 10yr yield remained unchanged.

Policy eyes are now shifting to the Jackson Hole meetings. There seems to be no economic fallout from the US political uncertainties.

The level of home resales in the US fell again in July for the fourth straight month. Volumes fell -0.7% in July from June to an annual rate of 5.34 mln units. It is their longest downward slide in five years. Rising prices and higher mortgage rates price more potential buyers out of the market. The median existing single-family home price was US$272,300 in July (NZ$401,000), up +4.6% from the same month in 2017.

Canadian retail sales took an unexpected dip in June, mainly through restrained buying of petrol. But this comes after a bit of a surge in May, so probably we are just seeing a balancing out here. Today's data isn't expected to knock a positive GDP result when it comes on Friday next week.

American and Mexican officials are close to resolving some of the sticking points that have stalled negotiations to overhaul the NAFTA, Mexico’s chief trade negotiator has said. But what the Canadians think about this is still unclear.

Saudi Arabia is reported to have canceled its plans to sell shares in state oil giant Aramco, which had been billed as the largest share float ever. The group of financial advisers working on a plan to sell 5% of the company domestically and internationally has apparently been disbanded.

The UST 10yr is has retreated over the past 24 hours and is now back at 2.82%, with the US 2-10 curve down to just over +22 bps and at its eleven year low. The Aussie Govt 10yr is at 2.54% (unchanged), the China Govt 10yr is at 3.65% down -2 bps, while the NZ Govt 10 yr is at 2.62%, also unchanged.

Gold is unchanged today at US$1,195/oz in New York.

US oil prices are up sharply at just under US$68/bbl. The Brent benchmark is now just under US$75/bbl. This rise is due to the effect of the new US sanctions on Iran.

The Kiwi dollar is starting today at a very similar level as yesterday at 67 USc. On the cross rates we are firmer at 91.1 AUc, and at 57.8 euro cents. That puts the TWI-5 at 70.6 and still at its four week average.

Bitcoin is little changed yet again at US$6,431 and only marginally lower than this time yesterday. That is three days of virtually unchanged prices.

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

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3 Comments

Canadian retail sales came in exactly at forecast by a -0.2 percent Given these are monthly numbers albeit June , they are more contemporaneous than New Zealand's quarterly numbers, and possibly prone to a higher possibility of error. Additionally Canada, both geographically and economically are multiples greater. How did our economists miss yesterdays retail data by so much, or are they so indoctrinated .Perhaps North American economists are just more capable than their New Zealand colleagues

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The Saudi government calls off the Aramco listing due to higher than expected market prices for oil. Aramco's majority stake purchase in SABIC will also help the government diversify its portfolio out of crude oil and grow non-commoditized exports.

https://www.cnbc.com/2018/08/22/saudi-arabia-calls-off-aramco-ipo-and-d…

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Hmm, seems like there's a possibility the UST yield curve inverts before this year is out. My pick would be October 2018.

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