US Fed turns positive, but restrained by low inflation; US durable goods orders weak; Japan readies huge fiscal stimulus, may get monetary boost as well; UST 10yr yield at 1.54%; oil lower and gold higher; NZ$1 = 70.2 US¢, TWI-5 = 74.4

Here’s my summary of the key events overnight that affect New Zealand, with news that huge new Japanese financial stimulus is on the way.

But first up, the US Fed has upgraded its assessment of the American economy reflecting improvements in its recent performance. It said the immediate risks have diminished and that leaves the door open to raise rates later this year, possibly as early as September. It is a Statement where the only issue seems to be the persistence of low inflation holding them back. Jobs, growth and the global background are now being assessed as no current worries.

But a month or two ago, the global worries were an issue, and that showed up in June data released today for durable goods orders.

The US dollar rose and equity markets recovered some earlier losses when the Fed statement was released. Benchmark bond yields didn’t react at all.

Now the focus will shift the the RBA next Tuesday. Markets are expecting a cut in their rate then.

In Japan, the Government there is about to announce a huge new fiscal stimulus program, perhaps more than NZ$375 bln in its latest bid to help its domestic economy emerge from deflation. They are expected to increase public expenditures on infrastructure building as well as accelerate efforts to boost farm exports and attract more foreign tourists. This fiscal plan will no doubt put some pressure on the Bank of Japan, who meet tomorrow, to support the Government action with easier monetary policy. It all looks a bit desperate in Japan at the moment from a policy perspective but the country’s economy is still actually ticking along ok, even if it is not setting the world on fire.

Back in New York, UST 10yr yields are lower at 1.54% having fallen earlier in today’s trading session.

The US benchmark oil price keeps on slipping, today by more than $1 and is now just under US$42/barrel and the Brent benchmark is just under US$43/barrel.

But the gold price is slightly higher, up to US$1,326/oz.

The NZ dollar will start today a little lower from this time yesterday despite a night-session flurry. The Fed induced stronger US dollar has caused the change of tack. It is now just on 70.2 US¢, at 94.4 AU¢, and at 64 euro cents. The TWI-5 index is now at 74.4.

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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// to generate the format for date representation in x axis

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var timestamday = 86400000;
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var timestammonth31 = 2678400000;
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var mm2 = time4.getMonth();
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for(i=0;i

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