Air travel grows strongly; US targets payday lending; US and Canadian trade deficits grow; "Prepare for hard Brexit"; Aussies on diet in August; UST 10yr yield at 2.35%; oil up, gold unchanged; NZ$1 = 71.2 US¢, TWI-5 = 74.2

Here’s my summary of the key events overnight that affect New Zealand with news of some new ground-breaking protections for very vulnerable borrowers.

But first, passenger growth in the world’s airlines was very strong in August, up 7.2% year on year. In the Asia/Pacific region, international passenger traffic grew +8.6%. Interestingly, this data also shows that Australian domestic air travel actually fell.

The OECD reported higher economic growth in the June quarter for almost all its members, and the highest in at least 3 years at about +2.5% pa.

The US is clamping down on payday lenders with some tough new regulations that may shrink the industry dramatically. That is because these lenders rely on fees, especially from defaulters, as part of their business model. Under the new rules, lenders will be allowed to make a single loan of up to US$500 with few restrictions, but only to borrowers with no other outstanding payday loans. For larger or more frequent loans, lenders will have to follow a complex set of underwriting rules intended to ensure that customers have the means to repay what they borrow. This industry has grown in New Zealand as well – we count 18 active brands in the local market. Their MO here is the same as the US, targeting vulnerable people. By the way, President Trump is actively seeking ways to role back these protections, but his chances are not high.

There was data out for the American trade deficit overnight for August. And while the monthly numbers came in pretty much on expectations, it is interesting to see the difference in the eight-month 2017 track compared to the same period a year earlier – mainly because the new US Administration said they would “improve” the situation of persistent trade deficits. But the reverse has happened. These deficits in goods and services traded are +8.8% higher this year than in 2016 (which was lower than 2015). They have gone backwards on this measure.

The Canadians also reported their trade deficit, and that is widening too. Lower exports to the US are the reason here.

And staying in Canada, planned major oil and gas pipelines from their oilfields to major markets are getting cancelled. This comes after persistent opposition in communities along the routes, and from some indigenous groups.

In Europe, German companies operating in the UK “must prepare for the worst-case scenario of a very hard exit” from the EU says the head of Germany’s powerful business lobby group. He warned those not making provision for the event that the UK quits the bloc without a new trade agreement “would be naive.” Meanwhile there seems to be a rush of American and other international financial institutions to rent large amounts of space in Frankfurt.

And the ECB said it discussed options for scaling back their QE program at their September policy meeting, but worried that the strengthening euro might upset the region’s economy. Lower for longer there, it seems.

In Australia, they are starting to think that the surprise stalling of their retail market in August may be a turning point. Spending in cafes and restaurants and on takeaway food plunged -1.3% in August to be only a little higher than it was the previous August, and lower per person after taking into account population growth. Apparently Aussies were dieting in August, said one analyst. The “lucky country” hasn’t had a recession for over 25 years, but the next one seems to be getting closer.

In New York, the UST 10yr yield is up +2 bps at 2.35%.

The price of crude oil is up a little today and now at US$50.75 a barrel, while the Brent benchmark is under US$56.75. This gain is because the OPEC output restraint agreement looks like it will be extended.

The price of gold is basically unchanged today, still at US$1,273/oz.

And the Kiwi dollar is slightly lower at 71.2 US¢, but that is actually now a four month low. On the cross rates we are now at 91.3 AU¢, and 60.8 euro cents. Our TWI-5 index is now at 74.2.

If you want to catch up with all the changes yesterday we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

Select chart tabs »
US$AU$TWI¥en¥uan€uroGBP
The ‘US$’ chart will be drawn here.
Loading…
Daily benchmark rate
Source: RBNZ

The ‘AU$’ chart will be drawn here.
Loading…
Daily benchmark rate
Source: RBNZ

The ‘TWI’ chart will be drawn here.
Loading…
Daily benchmark rate
Source: RBNZ

The ‘¥en’ chart will be drawn here.
Loading…
Daily benchmark rate
Source: RBNZ

The ‘¥uan’ chart will be drawn here.
Loading…
Daily benchmark rate
Source: RBNZ

The ‘€uro’ chart will be drawn here.
Loading…
Daily benchmark rate
Source: RBNZ

The ‘GBP’ chart will be drawn here.
Loading…
Daily benchmark rate
Source: RBNZ

Leave a Reply