RBNZ winning with its pause
The Reserve Bank of New Zealand (RBNZ) has a dual mandate:
- to support employment at its maximum sustainable level and
- maintain price stability.
It has lifted interest rates from 0.25% in August 2021 to the current 5.5% = a MAMMOTH 22x increase already.
On the price stability side of the equation, annual inflation eased to 5.6% in the September quarter 2023 = About to fall below OCR rate.
https://businessdesk.co.nz/article/e...paign=nzh-home
US Fed Nov hike looks unlikely
US Wage Inflation tempering despite continuing job growth
US CPI down to 2.31% (truflation as of 27/10/23) versus Government reported 3.7%
High OCR looks necessary and a cut is not likely until 2025, says ASB
Quote:
Originally Posted by
beacon
RBNZ winning with its pause
ASB’s Smith says the bank expects the unemployment rate to move below its maximum sustainable level by the end of next year. This should temper wage increases and significantly dampen pressures on core inflation.
Westpac senior economist Darren Gibbs says indicators suggest that employment growth has begun to slow in recent months... domestic inflation will moderate by enough to allow overall CPI inflation to move back into the target range over the coming year or so.
Jarrod Kerr, Kiwibank chief economist, says there are clear signs the tight financial conditions are already restraining demand.
https://tmmonline.nz/article/9765224...+any+time+soon
Another Fundamental ticked for NZD
New Zealand and Auckland house prices: Analyst CoreLogic says downturn is officially over
https://www.nzherald.co.nz/nz/new-ze...GDFDG627DMMZM/
No major surprises then! Markets are ok with it!
Quote:
Originally Posted by
winner69
Where it will end week ……..maybe .5725 if no clear indication of make up of new people government
National’s Christopher Luxon to negotiate with Act and Winston Peters
https://www.nzherald.co.nz/nz/nz-ele...IZAKJTFUDFZUE/
“Now we can get cracking,” Luxon told reporters... “We are working constructively with both parties. We are going to come together and form a strong stable government,” Luxon said.
Peters said NZ First wanted negotiations to be conducted with urgency. “What can we agree on ... we can’t all get what we want, we have to get a sound much much better government underway,” Peters told the Platform.
They'll keep each other in check, but not a bad result overall. Just a delay of another week or two... Seems like the markets expected that...
Scorching October puts 2023 on track to be hottest year in 125,000 years
Quote:
Originally Posted by
winner69
Don’t forget about El Niño ….last real powerful El Niño was 1997/98 …the 2015/16 was a relatively mild event
NZD went below USD40 cents following that 97/98 El Niño
Scientists say climate change is driving heatwaves across the planet, toppling previous records with alarming frequency.
This year, factors driven by climate change have combined with those produced by the El Nino climate pattern, during which warmer surface waters in the eastern Pacific Ocean drive extreme weather around the world. The current hottest year on record is 2016 – another El Nino year.
The ongoing El Nino weather pattern is set to last until at least April, the World Meteorological Organization said on Wednesday.
https://www.aljazeera.com/news/2023/...n-125000-years
Thanks for this early warning, Winner69. This is a true short-term risk for NZD as well as many other global currencies, as no one will be spared. Expecting volatility ...
Explained: Why this El Niño is behaving differently - and what it means for NZ
An El Niño climate pattern expected to spell a hot, dry summer for New Zealand’s north-east is looking to peak unusually late – meaning its mix of influences could linger on through next autumn.
Niwa meteorologist Ben Noll says the big climate driver might not reach its full strength until late January, in the thick of summer - while a “weather wildcard” could still leave the door partially open to tropical rainmakers finding their way down here over the warm season.
In New Zealand, El Niño tended to bring drier conditions in the north and east, wetter ones in the south and west - and westerlies prevailing generally everywhere.
Farmers in particularly exposed regions like Hawke’s Bay and Gisborne have long been preparing for the prospect of parched soils as warm westerlies begin to blow-dry away soil moisture.
https://www.nzherald.co.nz/nz/explai...D5QGFFLEHZPJM/
Powell's comment cocktail - Market "Shaken, not stirred"
Powell says:
- Fed is ‘not confident’ it has done enough to bring inflation down to its desired 2%, BUT Risks between doing too much and too little have come into closer balance.
- Fed remains steadfast in getting Inflation to 2%, expects getting it sustainably down to 2% has a long way to go, BUT is gratified by [inflation falling] progress
- Inflation is “well above” where the Fed would like to see it (2%), BUT Fed is attuned to the rise in Treasury yields, and policy is “significantly restrictive.”
- Fed is “attentive” that stronger-than-expected growth could undermine the fight against inflation and “warrant a response from monetary policy", BUT Expectation is for growth to “moderate in coming quarters”
Yet, the media picked up only on the 'not confident' and USD rose against all major currencies. It rose higher against most major EM currencies. NZD fell too, but less than most G10.
Interestingly, Treasury yields also rose after having fallen for over two weeks: 2yr +10bps to 5.032%, 10yr +11bps to 4.637% and 30 yr +12bps tp 4.772%.
No one picked up on what he said about the challenge posed by keeping rates anchored near zero, where they were before the inflation surge.
Powell said it is “too soon” to say whether zero-rate challenges are “a thing of the past.”
https://www.cnbc.com/2023/11/09/powe...tion-down.html
Expecting 62c this month, once NZ Government makeup clears
Quote:
Originally Posted by
winner69
Nzdusd back over .60 after overnight action
Yep, Big Day for NZD, on good volume - recent news confirms signals that stuff is getting better:
In US:
- US T10y below 4.5% recent lows, US T2y 4.83% - on Lower than expected US CPI https://www.cnbc.com/2023/11/14/cpi-...ober-2023.html
- Russel 2000 UP 5%, NDX UP 2.5%, SPX 500 UP 2%, https://www.google.com/search?q=russ...hrome&ie=UTF-8
- Should be followed by a relief rally in EM stocks and currencies today
In NZ:
- Food DOWN 3 months in a row https://www.stats.govt.nz/news/food-...-october-2023/
- Property UP 3 months in a row - QV House Price Index (average home up 2% over 3 months at Oct end, Auckland up 2.7%) https://www.newshub.co.nz/home/money...ice-index.html
- Houses to rise by an average 4.8%, while CPI slows to 3.6% over the next 12 months (so a small but positive 1.2% real growth finally), according to the Reserve Bank's survey of 37 business leaders and professional forecasters. https://www.newsroom.co.nz/sharp-ris...rices-forecast
Powell overreaching with QT
Quote:
Originally Posted by
beacon
... USD strength is weakening US...
UBS sees a raft of Fed rate cuts next year on the back of a U.S. recession
...increasing weight of higher interest rates. Credit and lending standards appear to be tightening beyond simply repricing. Labor market income keeps being revised lower, on net, over time,” UBS highlighted.
“According to our estimates, spending in the economy looks elevated relative to income, pushed up by fiscal stimulus and maintained at that level by excess savings.”
The bank estimates that the upward pressure on growth from fiscal impetus in 2023 will fade next year, while household savings are “thinning out” and balance sheets look less robust.
...“historically large” amount of credit that is being withdrawn from the U.S. economy.
https://www.cnbc.com/2023/11/14/why-...o-canada-.html
October saw China recovering
Quote:
Originally Posted by
beacon
NZD should keep inching up towards 62c as National Government formation negotiations enter final stages
- factory output up 4.6%
- retail sales up 7.6%
despite
- real estate investment down 9.3%, post CCP crackdown on excessive borrowing by developers two years ago and the pandemic.
Impact reflected in Baltic Dry Index reversion to the mean. One more box ticked for NZD
Immigration benefits outweigh costs. Great for NZ and NZD
Quote:
Originally Posted by
beacon
... stuff is getting better...
NZ's biggest ever migration-driven population gain for any 12 months period
NZ's Biggest source countries for foreign citizens - India, the Philippines, China, Fiji and South Africa. Why? NZ better on many counts...
Immigration fuels the economy. When immigrants enter the labor force, they increase the productive capacity of the economy and raise GDP. Their incomes rise, but so do those of natives. https://www.bushcenter.org/catalyst/...20of%20natives.
Yet, this happened at the same time as we experienced...
NZ's biggest ever net loss of NZ citizens in any 12 month period
A reflection on Labour policies and rule? Kiwis voting with their feet perhaps?
https://www.interest.co.nz/public-po...e-covid-levels
Sentiment Low after Rugby and Cricket losses?
Quote:
Originally Posted by
winner69
Nzdusd back below .60
.5966 - for the moment
Possibly low sentiment from consecutive sport losses on the international stage after a long dismal Labour governance - reflecting in low self-esteem and lack of confidence in NZ and NZD.
But despite the losses, I'd rather be in company of Mitchell Santners and Kane Williamsons than Simon O’Donnells. https://www.nzherald.co.nz/sport/cri...HJGLASW4NQKYI/
We may have lost to Indian cricket team, but we have won the Indian hearts. Time to build on that, while cherishing, preserving and celebrating our humane(ity)...
NZ Trade Deficit down 25% y-o-y. Wow!
Quote:
Originally Posted by
winner69
Nz trade deficit was a little larger than the market expected. This could lead to an increase in the NZ dollar.
New Zealand's trade deficit shrank to $1.709 billion in October 2023 from $2.315 billion in the same month of the previous year.
Exports down 9.3% to $5.4 billion, imports down 14% to $7.1 billion.
source: Statistics New Zealand
Go NZD :t_up:
NZ Wage Inflation has well and truly peaked
Quote:
Originally Posted by
beacon
... reported wage increases versus a year earlier dropped to 4.9% - that’s the lowest read since March 2022.
BNZ head of research Stephen Toplis says movement in the labour market is nothing short of startling. “Businesses have rapidly moved from not being able to find staff, for love nor money, to having choice in who they hire.”
This is best seen in NZIER’s QSBO which shows the ease of finding skilled labour improving markedly and labour turnover tumbling. Both of these variables are key indicators for future wage inflation. This, plus feedback from businesses, convinces us that wage inflation has well and truly peaked, Toplis says.
https://tmmonline.nz/article/9765225...ts+will+start+
Tanking? I'm surprised it's still below 62c.
Quote:
Originally Posted by
Daytr
I'm surprised the NZD isn't tanking based on those numbers.
RBNZ wanted consumer, corporate and Government to control spending. It is happening, leading to small but continuing successes in controlling Inflation and inflation expectations, without lifting OCR.
Plus National Government to form. Stimulation and growth to come with tax cuts, which while inflationary - strengthen NZ economy. Strong economy growing again = currency should keep getting stronger.
US and China are talking and trading again, which benefits China - and their proxy antipodeans. Why are we still below 62c?