US factories growing; consumers hesitate; big forex civil claim settled; Pepsi launches China milk drink; UST 10yr yield up; oil down; NZ$1 = 65.3 US¢, TWI-5 = 69.9

Here’s my summary of the key events over the weekend that affect New Zealand, with news of more dairy developments where NZ is on the back foot.

But first, American industrial production ratcheted up in July, according to data out from the Federal Reserve over the weekend. The growth in production was at its fastest pace in over a year, with a strong push from the car industry.

Their latest reading of consumer confidence however was a bit more wobbly – although these surveys in the height of the US summer vacation season can be a little suspect.

You may remember the US$6 bln criminal settlements on  the big banks for currency manipulation. That was back in May. Now the civil claims are starting and nine major banks have agreed to settle one claim for US$2 bln. Much more is to follow. Eventually, the size of these settlements could unsettle some of the world’s largest institutions.

Here’s something Fonterra must keep an eye on and not get blindsided: Pepsi has launched its first dairy product – an oats-based dairy drink – with JD.com in China to tap into the growing Chinese consumer preference for healthy drinks. It is Pepsi’s first launch of a new product exclusively through e-commerce. Dairy marketing is transforming quickly.

We have another dairy auction early Wednesday morning this week and this will likely set the tone for the rest of the week.

In New York, the UST 10yr yield benchmark has bounced back up quite a bit and starts the week back up at 2.20%. Our local swap rates have been pretty much range-bound over the past two weeks and will no doubt take cues from the higher US benchmarks set at the end of the Wall Street session.

The oil price is weaker at US$42/barrel, and Brent crude is now at US$49/barrel.

And the gold price is also a touch lower, now at US$1,113/oz. Actually, in times of uncertainty, it is not gold they seek out but paper, it seems. China however still wants the traditional yellow metal.

The New Zealand dollar starts the week at almost exactly the same point it started last week at 65.3 US¢, at 88.8 AU¢, and at 58.9 euro cents. The TWI-5 is at 69.9.

And China is talking up the idea that the newly adjusted Yuan may now float much more freely and operate like an open currency. We are being advised to expect much more variability, more like our own currency.

If you want to catch up with all the local changes on Friday, 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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for(i=0;i

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