US dollar rises on better data; IMF says China's currency now not overvalued; AU BOP deficit jumps; UST 10yr yield falls; NZ$1 = 72.3 US¢, TWI-5 = 76.9

Here’s my summary of the key issues from overnight that affect New Zealand, with news the New Zealand dollar has slipped to its lowest level against the greenback in almost five years*.

But first, there has been a flood of data released in the US after their long holiday weekend. And apart from factory data in the oil patch, most of it was ‘as expected’ or better.

American durable goods orders fell as expected, mainly because of lower aircraft orders. But excluding the ‘transportation’ component durable goods orders were up, which was better than analysts were expecting.

Sales of newly-build home rose much more than expected in April, up +7% from March, up +26% above the same month in 2014.

Consumer confidence came in higher than expected in May. The US house price index was also up more than expected. And the giant US services sector continues to expand, albeit at a slower pace.

Markets didn’t ignore the weight of this data and the US dollar has strengthened markedly overnight. Equity markets fell as the chances of a Fed rate hike rose.

In China, the IMF has declared that its currency is no longer overvalued. That will shift the debate after almost a decade of criticism of it and its part in the ‘currency wars’.

In Europe, there is still no Greek deal. But those talks are now just becoming irrelevant; Greece is bankrupt. For the EU, the ECB and the IMF it is increasingly looking like its ‘good-money-after-bad’. Greek voter resistance to reform has ruined them all.

In Australia, they have just reported a big jump in their balance of payments deficit. It was -AU$3.7 bln in the March quarter, a -AU$1 bln jump above the December deficit.

In New York, the UST 10yr benchmark yield is slightly lower and now at 2.16%.

The rising US dollar has affected commodity prices. The US oil markets are much lower with the US benchmark price now at just US$58/barrel again, and Brent crude is at US$64/barrel. But there is more to oil’s price decline.

The gold price is a lot lower at US$1,187/oz.

As we noted at the top, the New Zealand dollar starts today very much lower at 72.3 US¢, at 93.4 AU¢, and at 66.5 euro cents. The TWI-5 is at 76.9.

(* It did very briefly slip lower in February this year.)

If you want to catch up with all the local 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

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