Powell says inflation data to set rate track from here; no movement on big issues; Mexico confidence jumps; hard Brexit looms; China CPI drops; UST 10yr 2.73%; oil and gold little changed; NZ$1 = 67.9 USc; TWI-5 = 71.8

Powell says inflation data to set rate track from here; no movement on big issues; Mexico confidence jumps; hard Brexit looms; China CPI drops; UST 10yr 2.73%; oil and gold little changed; NZ$1 = 67.9 USc; TWI-5 = 71.8

Here's our summary of key events over the holiday that affect New Zealand, with news markets are in a holding pattern today.

In Washington, Federal Reserve Chairman Jay Powell said muted inflation will give the central bank the ability to be patient in raising rates.

And some large, mall-based US retailers such as Macy's have reported ho-hum holiday sales and their stock has been sold down hard in market trading today.

And there is less-than no progress in the US Government shutdown negotiations. And the China-US trade talks are in abeyance at present. The US Administration thinks it is getting the upper hand in them. But that hasn't stopped the Chinese yuan jumping to a 24 week high on hopes those trade talks lead somewhere positive for them.

In mid-afternoon trade, the S&P500 is marginally lower, down -0.3%. This follows Europe which was up by a similar small amount. Yesterday, Tokyo closed -1.3% lower, Hon Kong +0.2% up and Shanghai -0.4% lower. Australia was up +0.3%, New Zealand was down -0.3%.

The number of Americans filing applications for jobless benefits fell more than expected last week, pointing to sustained labour market strength.

In Canada, they issued C$8.3 bln worth of building permits in November, up +2.6% from October and up +8.3% from November 2017. Higher construction for commercial buildings drove most of the gain. In fact, residential permits fell -2.5% and those for single family homes fell -5.5%.

In Mexico, consumer confidence there has soared beyond all analyst estimates in December after their newly elected President took office vowing to make the economy grow faster, curtail surging violence and root out corruption.

With less than 100 days until Brexit, the British have no plan and no agreement with the EU. Things are now very likely to get very messy and companies are now scrambling to be ready for that mess.

In Europe, both Ford and Indian-owned Jaguar Land Rover unveiled sweeping job cuts as carmakers struggle with a slump in demand for diesel vehicles, tougher emissions rules and a global economic slowdown led by China. The cuts and shutdowns will be particularly hard for the UK.

China's official CPI fell in December, according to government data released late yesterday. Markets were expecting a 2.1% inflation rate, slightly less than the November 2.2% rate. But what they got was a 1.9% rate. Their producer price index fall was even steeper. In November it was a lowish +2.7% pa and a sharp drop to +1.6% was expected. But what was posted was a +0.9% pa rate.

The UST 10yr yield is holding at 2.73%. Their 2-10 curve is also unchanged +16 bps. The Australian Govt. 10yr yield is also little-changed 2.32%, down -1 bp. The China Govt. 10yr yield is marginally higher at 3.14%, while the New Zealand Govt. 10yr yield has moved -6 bps lower to 2.36%.

Also sharply lower are local wholesale swap rates with both the 1 and two year durations dropping to equal-record lows yesterday.

Gold is down -US$2 to US$1,288.

US oil prices have slipped slightly overnight but are still just over US$52/bbl while the Brent benchmark is just over US$61/bbl.

The Kiwi dollar starts today little changed at 67.9 USc and basically holding on to yesterday's good rise. On the cross rates we slipped against a strengthening Aussie to 94.4 AUc, and are up at 59 euro cents. That puts the TWI-5 at 71.8.

Bitcoin has fallen sharply today after two separate retreats in the past 24 hours. It is now at US$3,612 which is almost a -10% dump. 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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31 Comments

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Highlight new comments in the last hr(s).

“Great Dollar Dump”: Russia Shifts $100bn of Its Reserves into Yuan, Yen and Euro
https://www.globalresearch.ca/russia-shifts-100bn-of-its-reserves-into-y...

The US dollar may one day be rivaled by the Chinese national currency – the yuan – which is likely to become a major global reserve currency, according to the governor of the Bank of England (BoE), Mark Carney.

https://www.rt.com/business/448487-yuan-rival-dollar-carney/

Eurodollar pain continues, eurodollar the unofficial real reserve currency.

https://www.alhambrapartners.com/2019/01/10/2019-outlook/

Andrewj, have you read this book? https://www.amazon.com/Currency-Wars-Making-Global-Crisis/dp/1591845564

I read it over the break and it was marvelously entertaining for a book on international finance and monetary policy. It did in later sections delve into the possibility of Russia mounting a campaign to undermine the US$ as the international reserve currency.

I'm not ofay enough with monetary policy and finance to know the robustness of the book...

Standard Chartered Bank: By 2030, China’s GDP will be twice as much as that of USA in terms of nominal terms on PPP basis. 7 of the world’s top 10 economies by 2030 will likely be current emerging markets.

Britain’s biggest car maker Jaguar Land Rover is to axe thousands more jobs after being hit by falling sales in China and declining demand for diesel cars.

https://www.telegraph.co.uk/business/2019/01/10/jaguar-land-rover-slash-...

" It places the vital Five Eye Alliance “at risk”...the European Commission an “undemocratic organisation” that had “demonstrated how untrustworthy and hostile towards the UK” it is by “using the Irish border as a weapon...Theresa May’s deal (is) a “bad agreement” and accused the EU of demanding a £39billion “ransom”.. Number 10 (has a) “worryingly poor understanding of the issues”.”

https://www.telegraph.co.uk/politics/2019/01/10/theresa-mays-deal-threat...

These quotes, crying and whinging about Europe being tough on the UK wouldn't be written by the British by any chance. LOL.

And people argued with me on this site 6 months ago that the UK were in a stronger position than the EU...

Yvil 100% but please also spare a thought for the many of us Brits who are devastated, embarrassed and cringing over Brexit, who were proud to consider ourselves European and who wished the Tories had not ever opened this epic can of worms!

Not to say that there aren't problems within the EU, or the way various issues have been managed....but whatever happens to the EU will always effect the UK, just as whatever happens in Oz will always effect NZ. As far as i'm concerned, having no seat at the EU table means greatly diminished power and agency!

Plus NOT ONCE did I ever hear anyone from the Leave Campaign ever mention Northern Ireland. Not one second was spent considering the ramifications Brexit would have on Ireland and Northern Island. And yet now Brexit has threatened all of that... suddenly that's the EU's fault? What a load of delusional nonsense.

Gingerninja, have you signed the following? https://www.change.org/p/officially-rename-eton-mess-as-brexit

Scrambling to be ready for the mess? "Make no mistake, Her Majesty’s Revenue & Customs are ready for a No Deal Brexit. All computer systems will be ready by January 19 and businesses have been advised about “Trusted Trader Schemes” to keep trade flowing.

What we are not being told by the harbingers of doom is that inward investment into the UK in the first half of 2018 was the second highest in the world after China, but ahead of the US and Germany.

We are not told that 94 per cent of businesses in this country are not trading in Europe.

Only five per cent of GDP is involved in cross-border trade in goods with EU countries and only 12 per cent overall if you include services.

The majority of our trade is with the rest of the world. And as this carries on day in, day out, we see no nightmare queues of lorries backed up at our ports."
https://www.thesun.co.uk/news/8150907/no-deal-brexit-deal-hope-rocco-for...

I what you say is true, then why doesn't the UK just give the finger to the EU and say hasta la vista…
BECAUSE THEY CAN'T AFFORD TO

The entrepreneurs like the author, Tim Martin, Dyson etc. want to give them the finger. Only the political class and bureaucrats want to cling on to their jobs for life and gold plated EU pensions.
From the article "The EU has a trade surplus of £95billion with the UK.

In 2017, European countries sold £341billion-worth of goods to us — that’s a lot of cars, food and wine they want to go on selling us.

It is strongly in Europe’s interests to cut a deal."

Edit. "Brexit-hating peers who voted to keep Britain inside the single market are sitting on EU pension pots worth £5.7million."

Is that why Dyson is choosing to build its new electric cars in Singapore rather than the UK?

Doesn't quite fit the narrative does it? Oh well, at least SOMEONE is having their cake and eating it in the UK, just like Boris promised. Shame that it's just a few billionaires rather than the actual British people.

"the actual British people" voted to leave. That is the only narrative as much as the political and media class would like to ignore it. Dyson can build plants where ever he likes, look the FDI numbers, the UK is second only to China. Dyson is a drop in the bucket.

Britain has no car industry, aside from Morgan, the wine's actually no longer a joke, but there's not enough of it, and it hasn't been self-sufficient on the food front for a couple of centuries.

The EU is also the largest trading partner for the UK, so it's not a one way street in terms of who needs who for trade.

The EU have cut a deal, it's the deal on the table.

My book this week.

' A gentleman in Moscow' by Amor Towles.

A different view of Moscow than ' City of thieves' by David Benioff

I greatly enjoyed reading 'A Gentleman in Moscow'. Entertaining, and very nice prose to read.

I loved it. I see they are making a TV series on it with Kenneth Branagh, who is perfect for the Counts role...

Michael Moore almost doing a sales pitch for voting for Trump. Interesting description of the protest vote on the status quo regardless of those disagreeing /disliking him.
What will CNN do if he returns in 2020?

Is Michael Moore implying that 50% or more of Americans are only capable of building cars? I can see an issue with that, but not the same issue as Moore sees.

His approval rating is 30135% and those who voted against Clinton and for Trump on his promises have got nothing, bound to go well. Then add it some real progressives are lining up. Then the biggee impeachment. Even if the Senate wont impeach Trump the political fallout and publication of the details look like it will be easily big enough to sink Trump and a few (enough) Republicans in the Senate. if 2018 was a blue wave trump could turn 2020 into a blue tsunami.

With the sharp drop in swap rates will we see the banks offering 3.5% or 3.75% fixed for one year mortgages some time in January

Not surprising that mortgage rates are dropping, they have too for both here and Oz to try to subdue a property market crash now that Asian foreign buyers are gone.
So far this article shows a more honest appraisal of what's happening with the Australian property market that's also impacting us.
Article channel news asia: Australian property market poised for steepest fall
https://www.channelnewsasia.com/news/business/australian-property-market...

I'm a UK supporter to the end. F...k Europe, they're socialists. If No Deal happens, which will be a blessing in disguise, the pound will drop & life will carry on as normal with one difference, labour in the UK will become cheaper than in Europe, giving the Brits an advantage that the socialists in Europe will want to negate. The EU will be the poorer from Brexit than everyone wants to admit. Sure, the Brits will do it tough for a year or two, but that wont do them any harm in the long term. I'm not sure about Theresa May's deal as it stands, but my word, she's one tough customer with a real bulldog spirit. Go the Brits!

The UK are just as socialist as most of Europe, most advanced nations have a reasonable welfare state, universal health care etc. Just a few outliers like the US do otherwise.

The pound would have to drop a hell of a long way for the UK to negotiate on wages with the peripheries of Europe, and the drop in quality of life would be dramatic to achieve that strategy.

edit: also, I'm from the UK and am also a UK supporter. I want what's best for the country so am strongly hoping Brexit is averted and the UK can play nicely with the huge trading block on their doorstep again.

mfd come on? Do you really expect your reasonable, balanced perspective stands even the tiniest chance against the glorious Brexit hyperbole? Don't you know about the cake and the eating of it? Don't you know about the mythical but super important beast, that is sovereignty, which will slay the evils of the EU BUREAUCRATS and that when they are defeated all white skinned British persons will qualify to fly a spitfire, whilst eating a Devonshire cream tea and having access to a range of banana shapes without the interference of the EVIL WICKED EU WHO DELIBERATELY WANT TO SPOIL EVERYTHING WHOLESOME AND BRITISH BECAUSE THEY WANT BIG PENSIONS AND TO SIT IN MEETINGS AND NEVER DO ANYTHING GOOD EVER.

But think of the people Ginge & MFD! it's a working class uprising; Jacob Rees-Mog, Michael Gove, Bo-Jo, Farage - working class heroes to a man! Real salt of the earth types, nary a spoon let alone a silver spoon amongst them....

Solidname, excellent point but also, we should all feel greatly reassured by the fact that after the referendum, the most common google searches in the UK were revealed to be "when is Brexit" and "what is Brexit"? Because as Gove so poignantly explained, the British have, frankly had enough of experts and want to be able to vote on matters with far reaching political, economic and personal ramifications without any information, knowledge or research at all. If some multi millionaire, Etonite like Rees-Mogg with a tax avoiding hedge fund in the Cayman Islands feels strongly that Remoaners are just using "operation fear" to take away the Queen, Sunday Roast dinners and force them to work with the Polish, then who can blame them? You've got to trust instinctual voting really haven't you? Especially when the campaigns were totally honest and legal too. Oh wait, no they weren't. But still... GOD SAVE THE QUEEN!!

DP

LJM,

So,as a so-called fervent UK supporter,you want Brexit because labour will then be cheaper than in the EU. What an ambition;to turn the UK into Europe's sweatshop. Presumably,to hasten this process you would see the abolition of anything that would 'get in the way' like health and safety measures,minimum wages,environmental protection and so on. Perhaps you could bring back the Victorian Britain of "dark,Satanic mills".
This is the Theresa May who so misread the political mood that she called a quite unnecessary election. You clearly have no idea what a hard Brexit means for business in the UK and sadly,much of the the pain will be felt in those areas which voted most strongly for it.