Markets await Fed rate cut decision

Kia ora,

Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from Interest.co.nz.

Today we lead with news we are in the shadow of tomorrows US Fed rate decision. There almost certainly will be a rate cut, but the size of it is still in doubt. Place your bets.

Meanwhile, today's dairy auction was a relatively tame affair, largely delivering what the derivatives markets signaled. But AMF and butter slipped, with the rest of the powders and cheese all rising about +3%. But there was more of the weak milkfats in this auction than normal so the overall price rose only +0.8%. In NZD terms it was similar. There will be little to shake farmgate payout forecasts in this event's results.

And staying local, we should note that there is another electricity crunch underway this morning from 7am to 8:30am. Prices are under pressure as you would expect.

Elsewhere in the US, the data released overnight delivered another set of positives. August retail sales grew when a slip was expected. And July retail sales were sharply revised higher. Last week's Redbook index rose +4.7% from the same week a year ago.

US industrial production rose and by more than expected in August. And that means on a year-on-year basis it is no longer negative.

And their NAHB/Wells Fargo Housing Market Index rose in September beating expectations. This breaks a string of four consecutive monthly declines.

There was a well-supported but relatively small UST 20yr bond auction today where the median yield came in at 3.97%, down from 4.10% at the equivalent event a month ago.

In Canada, their CPI inflation rate fell to 2.0% and back to where their central bank needs it to be. It was a slightly larger adjustment lower than expected. The Bank of Canada next reviews rate on October 23 and there is growing talk of a -50 bps reduction then.

Meanwhile Canada housing starts in August came in lower than expected.

Across the Pacific, Singapore's August exports came in softer than was anticipated.

But India's August exports beat estimates, even if the rise seems minor and overall Indian exports are not large by world scales.

Remember, China is on holiday today.

The UST 10yr yield is now at just on 3.64% and up +1 bp from this time yesterday. 

The price of gold will start today at US$2566/oz and down -US$15 from yesterday's high.

Oil prices are up +US$1 at US$71.50/bbl in the US while the international Brent price is now just under US$74/bbl.

The Kiwi dollar starts today at 61.8 USc and down -10 bps from yesterday. Against the Aussie we are down -20 bps at 91.6 AUc. Against the euro we are down -10 bps at 55.6 euro cents. That all means our TWI-5 starts today at 69.4, and down a minor -10 bps from yesterday.

The bitcoin price starts today at US$60,835 and up +4.9% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.3%.

You can find links to the articles mentioned today in our show notes.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again tomorrow.