NZ First Impressions: RBNZ Chief Economist Speech and Comments on Recent Data

The tone of RBNZ Chief economist Conway’s speech was hawkish and seemed to push back on market expectations for any policy easing in the near term.

Sunset Market Commentary

European stocks were off for a blazing start in the wake of new record highs on Wall Street (S&P 500, Down Jones) end last week. The EuroStoxx50 gapped >1% higher at the open before losing some momentum. US equities open higher as well, resulting in new highs for the major indices but the Nasdaq.

Bank of Japan Continues its Loose Monetary Policy

The Bank of Japan (BoJ) kept its quantitative and qualitative easing with yield curve control policy unchanged this morning as expected. The policy rate stays at -0.1% and the 10-year yield target around 0, with the upper bound of 1.0 percent as a reference rate. BoJ has also published a new Economic Outlook.

Say Something Hawkish, I'm Giving Up on You

Today, the BoJ didn’t only announce that it would keep the interest rates unchanged at -0.10% and the upper band for the 10-yer yield steady at 1%, but the bank lowered its inflation forecasts citing the decline in oil prices.

Crypto's Decline Looks More Like a Sell-off than a Correction

The crypto market lost over 5% in 24 hours, to $1.52 trillion. Bitcoin has remained under pressure since the start of the week after pausing in the sell-off on Saturday and Sunday. The persistence of the sell-off has triggered a sell-off in many altcoins, losing with greater amplitude than BTC.

Japanese Yen Pares Gains after BOJ Meeting

The Japanese yen is slightly lower in the European session on Tuesday. USD/JPY fell 0.54% after today’s BoJ policy meeting but has pared most of those gains and is trading at 147.82, down 0.18%.

Sunset Market Commentary

Very few data in the EMU and the US today, with the ECB January lending survey the exception to the rule. The report showed a moderate further tightening of credit standards for loans to firms. Banks also reported a further net tightening of their credit standards for loans to households. This was small for loans for house purchases and more pronounced for consumer credit and other lending to households.

NZD/USD Stems Slide, Inflation Next

New Zealand’s economy has struggled in the fourth quarter and a soft services release won’t help things. The Performance of Services Index (PSI) slipped to 48.8 in December, a four-month low. This followed a November reading of 51.1. A reading below 50 indicates contraction. The low reading was driven by concerns over the cost of living and the economic slowdown.

Will US GDP Surprise to the Upside?

The US dollar started the new year on a strong note. A series of economic indicators have reaffirmed the resilience of the US economy lately, forcing traders to reconsider how quickly and how deep the Fed will cut interest rates this year.

NZ First Impressions: Consumers Price Index, December Quarter 2023

The divergence between the domestic and imported components of inflation helps to illustrate the big concerns that the RBNZ is trying to balance. Inflation is coming down, and faster than the RBNZ has been expecting. That will be important for stabilising inflation expectations and means that the RBNZ will feel more comfortable keeping the OCR on hold for now (recall that the RBNZ’s last policy statement in November signalled some chance a further rate rise).