Interest rate markets have been quiet with the US market closed. Treasury futures have oscillated aimlessly in a tight range and are pretty much at the level of the NZ close.
The only news overnight worth mentioning, and even that is debateable, is the IMF upgrading its growth outlook for the US, Europe and Japan and downgrading the emerging market growth outlook, leaving its world growth forecasts unchanged.
Trump’s policies have been a big factor here, with US growth revised up 0.5% on Trump’s plans to cut taxes and spend more on infrastructure. Capital outflows from emerging markets on the Trump factor have softened their outlook.
NZ rates barely changed yesterday and there was very little trading done. The 2-year swap rate was marked unchanged at 2.40% and the 10-year rate was marked half a basis point lower at 3.40%.
Hopefully traders will see a bit more action today. The morning kicks off with the release of the REINZ housing market report and NZIER’s Quarterly survey of business opinion. The former is likely to show Auckland’s property market coming off the boil and we’ll get a better idea of how tighter credit conditions are impacting the rest of the market.
In the QSBO it would be good just to be able to match the prior quarter’s lofty activity indicators. Some lift in pricing and cost indicators in a world of higher oil prices are likely. This would keep the market believing that tighter NZ monetary policy is more likely than not in 2017, a supportive factor for the NZD this year on the crosses.
Tonight sees the second GDT dairy auction of the year. Farmers will be hoping for a better result than the chunky fall seen in pricing last fortnight, albeit consistent with our view that the price cycle is maturing and we’re well overdue for some consolidation in that market.
Globally, all eyes will be on the UK May’s speech on Brexit for which a time has yet to be released. The risk, of course, is more GBP volatility. The Fed’s Dudley also speaks in the early hours of tomorrow morning.