NZ First Impressions: Consumer Price Index September 2023

New Zealand consumer prices rose 1.8% in the September quarter which saw the annual inflation rate dropping back to 5.6%, down from 6.0% in the year to June. Today's result was below our forecast, and much lower than the RBNZ expected in the August Monetary Policy Statement.

RBA Minutes: A Low Tolerance for Upside Surprises

Further rate increases not completely off the table, but only if the inflation outlook changes materially from here. The RBA Board again considered both the case for a rate increase and the case for leaving rates unchanged at its October meeting. But without much new information in the month, it concluded that there was no need to move.

No Escalation Not Good Enough

Stocks gained, and bonds fell yesterday on US and allies’ efforts to deescalate tensions in the Middle East. Yet Israel told the US ‘to embrace for a long war’.

De-escalation Narrative Could Still Color Trading Today

We think the de-escalation narrative could still color trading today, keeping (long-term) yields on an upward path within their sideways trading ranges. The upper bound is capped at 3.02% in Germany and 4.88% in the US (10-y). A gentle risk-on mood is usually USD-negative but it being this fragile we don’t expect it to weigh (substantially) on the greenback. The economic calendar contains US retail sales.

Australian Dollar Calm after RBA Minutes

The Australian dollar has extended its gains on Tuesday. AUD/USD is trading at 0.6353 in Europe, up 0.18%.

The Crypto Market Went Uphill

The crypto market cap rose 1.5% over the last 24 hours to $1.091 trillion. Yesterday, the market surged briefly on the false news of Bitcoin spot ETF approval. But interestingly, the ensuing market tide did not derail the short-term upward trend. That said, we continue to see continued elevated trading volumes. We view this as good news, given that the price is not high by historical standards. It is an influx of fresh buyers rather than an active exit from the market.

Sunset Market Commentary

US Treasuries underperform following in the release of strong(er than expected) September US retail sales. The topline number rose by 0.7% M/M with the August reading being upwardly revised from 0.6% to 0.8%. The retail sales control group – proxy for consumption in GDP calculations and excluding food services, auto dealers, building materials stores and gasoline stations– surged by 0.6% M/M (vs 0.1% expected) and the August figure up at 0.2% from 0.1%.

GBP/USD Slips on Strong US Retail Sales

The British pound has declined 0.56% against the US dollar on Wednesday, wiping out yesterday’s gains. In the North American session, GBP/USD is trading at 1.2158, down 0.48%. The pound’s downswing was driven by a higher-than-expected US retail sales report.

ECB Preview

Next week, ECB is widely set to be on hold in terms of policy rate changes for the first time since June last year. Since the September meeting, inflation and growth data have been broadly in line with expectations and taking into account the clear guidance from ECB, no changes should be expected at the upcoming meeting.

Israel-Gaza Conflict Views & Potential Implications

After years of geopolitical developments altering the direction of the global economy and financial markets, the conflict in Israel and Gaza has the potential to further disrupt economic and financial markets trends. In this report, we provide perspective on the possible implications—geopolitical, economic, markets and political—of military conflict between Israel and Hamas.