US inflation up; Fed holds pat; US deficit swells; Japan machine tool orders up; China housing sales jump; RBA says not planning rate cut; UST 10yr 2.47%; oil and gold up; NZ$1 = 67.6 USc; TWI-5 = 72.1

US inflation up; Fed holds pat; US deficit swells; Japan machine tool orders up; China housing sales jump; RBA says not planning rate cut; UST 10yr 2.47%; oil and gold up; NZ$1 = 67.6 USc; TWI-5 = 72.1

Here's our summary of key events overnight that affect New Zealand, with news some Japanese and Chinese data may be suggesting the sagging growth trend could be turning.

Firstly however, American consumer prices rose +1.9% in the year to March, which was the most in 14 months. It was also slightly higher than analyst expectations. The lift was driven by rises in medical care, food, and housing. But the underlying inflation trend remained benign against the backdrop of slowing domestic and global economic growth.

In fact, today's release of the minutes of the last Fed meeting shows they see little need to change rates this year. And that is because they see muted inflation along with greater risks to the American economy from the global growth slowdown .

One thing not 'muted' however is the growth in the US Federal budget deficit. Although it came in lower than expected in March, prior months were revised up and in the past 12 months stand as a deficit of more than -US$870 bln which is +18% higher than for the same period last year. It has risen to -4.3% of US GDP because there has been zero growth in 'receipts' while 'outlays' have risen +3.2%. (Corporation taxes are down -13%, Defense is up +9%.)

(The latest data on US mortgage applications was weak.)

Japanese machine tool orders rose for the first time in four months, up +1.8% from February, a welcome change even if the rise wasn't quite as high as analysts expected.

The ECB reviewed rates overnight and left all their settings unchanged. The main takeaway from today's meeting is that ECB officials reckon EU growth has stopped weakening even if the turn down has been longer than they expected, and that inflation seems to be edging closer to their target of +2%. In fact, they are now 'examining' the move away from negative interest rates.

The trade talks between China and the US amble on, with technical progress only; the two sides have basically settled on a mechanism to police any agreement, including new enforcement offices.

In China, there are signs their housing market is turning up again, with some key developers recording +20% rises in sales in March.

And staying in China , they are justifying tighter scrutiny and security over the Muslim community by referring to the Christchurch massacre, saying the killings were a reminder of the need for more security at religious venues. It is an especially cruel Orwellian turn.

In Australia, their election date is set to be announced later today as Saturday, May 18. We are in for an intense five week campaign, one the Murdoch media machine will attempt to mess with - not to mention other offshore actors. It is likely to be brutal in the usual Aussie way.

And a senior RBA spokesperson has acknowledged they are watching their housing market even more closely, especially around the level of mortgage arrears and negative equity. However, he also said they don't expect to have to cut their benchmark interest rates any time soon.

The UST 10yr yield is softer today at 2.47% and that is another -3 bps lower than this time yesterday. Their 2-10 curve is positive at +15 bps and their 1-5 curve is still negative at -13 bps. The Aussie Govt 10yr is down -2 bps at 1.87%, the China Govt 10yr is up +3 bps at 3.32%, while the NZ Govt 10 yr is at 2.10%, and that is up another +6 bps since this time yesterday and a +10 bps rise in just two days.

Gold is up another +US$4, now at US$1,308/oz.

US oil prices are on the rise, now just over US$64.50/bbl while the Brent benchmark is just over US$71/bbl. Stronger than expected American petrol demand is behind the lift.

The Kiwi dollar is a little firmer this morning at 67.6 USc. On the cross rates we have dipped to 94.4 AUc. Against the euro we are still at 60 euro cents. That leaves the TWI-5 at 72.1.

Bitcoin has taken another jump, up by +2% overnight to US$5,306. This rate is charted in the exchange rate set below.

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

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Source: CoinDesk

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5 Comments

So are we expecting a cut at next RBNZ meeting on 8th May?

There is a distinct chance of a rate cut , but on the other hand as it is a Friday and all is well with the World Debt and the Housing Bubble, chances are they may have to print a few more trillions to make ends meet. If borrowing was the answer to all our prayers, would we be richer or poorer, building a fine country, or will the masses be fined again for saving in this infinite, finite World. The answer my friends is blowing in the Wind, BREXIT ...yes a Capital idea is a May ..be.
Trump is a Border Guard Leader, having fired his Advisor on that subject, as she did not agree with his Man-date., leading the World in stopping migration, except Maybe rich plonkers to fill his Luxury Hotels, Golf Courses and of course his coffers. But wait there is more, we are heading for another collapse, so Maybe, May, Trump and all those real politicians, can get together and agree in Principal....Money makes the World go round.....and interest, is or used to be part of that. Debt is so good for are souls.....but not for poor individuals...saving a crust and trying to keep ahead of the Game... I rest my case.

Nice to see the search bar back.

Did the REINZ data release get bumped back a few days? I thought it was today?

The RBA "said they don't expect to have to cut their benchmark interest rates any time soon."
Oh really, we'll see if that pans out. Even Moody's has tripled their forecast downwards for the Sydney property market for this year to -9.3%.