US Fed commits to rate hike; US CPI and wage data supportive; China stocks gyrate; Japan improves; RBA accuses banks of credit card gouging; oil sinks; NZ$1 = 66.2 US¢, TWI-5 = 70.7

Here’s my summary of the key events overnight that affect New Zealand, with news of more unnatural Chinese stock market activity.

But firstly, in the US, the Federal Reserve minutes from their last meeting were published overnight. They showed an improving American job market has edged them closer to an interest rate hike even as policymakers continued to express broad concerns about lagging inflation and the weak state of the world economy. And bond guru Bill Gross said overnight that he thought there will be a rate hike announced at the next meeting.

Inflation in the US came in pretty much as expected in data out overnight, with the key measure of “CPI-less-food-and-energy” up +1.8% as expected. At the same time, real average weekly earnings were up +2.2%, higher than the previous reading of +1.8%. This data is unlikely to deter the Fed from its September policy rate hike.

Worryingly odd trading in equities continues in China. Their stock markets took a wild ride yesterday, tumbling and soaring in a session that made little sense other than to highlight that investors have almost no faith in a month-long government effort to stabilise them. After being down more than -3% on the day, they then jumped to close up +1% after state-backed funds jumped in to change the direction. All very unreal.

In Germany, their parliament has approved the Greek bailout deal.

In Japan, apart from a bigger trade deficit, data out recently has been very encouraging. In fact we are seeing a substantial decline in credit default swap spreads for Japanese government debt.

In Australia, their Reserve Bank has accused banks of super profits from their credit card business, saying they have added 3% to their already fat margins since 2009 and taking their spread up to 9%. It is likely to be just as bad in New Zealand.

In New York, the UST 10yr yield benchmark is marginally lower today at 2.16%.

The oil price is also lower and now just under US$41/barrel, with Brent crude down to US$47/barrel. The oil glut is deepening.

The gold price however is up, now at US$1,130/oz.

The New Zealand dollar starts today marginally firmer than where it was at this time yesterday. It is at 66.2 US¢, at 89.8 AU¢, and at 59.6 euro cents. The TWI-5 is at 70.7.

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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for(i=0;i

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