Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

NZ dollar steady as investors shrug off US CPI data


By Rebecca Howard

July 12 (BusinessDesk) - The New Zealand dollar held its gains on expectations stronger-than-expected US inflation data won't prevent a rate cut there later this month.

The kiwi was trading at 66.66 US cents at 8am in Wellington from 66.67 US cents at 5pm. The trade-weighted index was at 72.91 from 72.85.

The US consumer price index - excluding the volatile food and energy components - rose 0.3 percent in June, versus an expected 0.2 percent. Annual core inflation was 2.1 percent.

While the data pointed to some signs of a pick-up in underlying inflation it is "unlikely to have changed Fed officials’ minds” regarding pending rate cuts, said Capital Economics.

It noted that the minutes of the June meeting released this week showed "many" Fed officials had seen a stronger case for looser monetary policy in the near term. This reinforced Federal Reserve chair Jerome Powell's testimony this week that seemed to point to a July rate cut.

Kiwibank trader Mike Shirley also noted that the Federal Reserve focuses on core personal consumption expenditures - or PCE - for monetary policy. The core PCE price index increased 1.6 percent year-on-year in May and has undershot its target this year.

Expectations that the Federal Reserve would cut rates by at least 25 basis points at the end of the month were solidified when Powell reiterated his previous day's comments in testimony before the Senate Banking Committee overnight.

“Despite US inflation rising by more than expected in June, markets remain firm on their expectation of a 25bp cut at the July FOMC meeting after Fed chair Powell maintained his easing bias overnight,” said ANZ Bank FX/rates strategist Sandeep Parekh.

According to the CME Group's FedWatch Tool, there is now a 20.4 percent chance of a 50 basis-point rate cut and a 79.6 percent chance of a 25 point cut. Yesterday, there was a 31 percent chance of a steeper cut.

Kiwibank's Shirley noted that the European Central Bank also showed a dovish easing bias in minutes from its latest meeting. Members were “fully on board for the idea of additional monetary policy stimulus.”

The kiwi dollar traded at 59.22 euro cents from 59.12 late yesterday.

It was at 95.53 Australian cents from 95.54, at 53.19 British pence from 53.18, 72.27 yen from 71.95, and at 4.5777 Chinese yuan from 4.5763.

(BusinessDesk)

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Crown Accounts: Treasury HYEFU Sees Deficit Then Rising Surpluses

An operating balance before gains and losses deficit of $0.9 billion is forecast in the current year, before returning to a small surplus in 2020/21 which then grows to reach $5.9 billion (1.5% of GDP) in 2023/24. More>>

ALSO:

Fuels Rushing In: Govt "Ready To Act" On Petrol Market Report

The Government will now take the Commerce Commission’s recommendations to Cabinet...
• A more transparent wholesale pricing regime • Greater contractual freedoms and fairer terms • Introducing an enforceable industry code of conduct • Improve transparency of premium grade fuel pricing... More>>

ALSO:

Reserve Bank Capital Review Decision: Increased Bank Capital Requirements

Governor Adrian Orr said the decisions to increase capital requirements are about making the banking system safer for all New Zealanders, and will ensure bank owners have a meaningful stake in their businesses. More>>

ALSO:

Aerospace: Christchurch Plan To Be NZ's Testbed

Christchurch aims to be at the centre of New Zealand’s burgeoning aerospace sector by 2025, according to the city’s aerospace strategic plan. More>>

ALSO: