Soft US inflation data sees markets price in two Federal Reserve rate cuts later this year. Gold rises and the US dollar falls as markets turn from trade talks. Subdued retail demand continues in New Zealand. India’s inflation is weaker than expected in May.
In our deep dive interview, ANZ Senior Economist Matthew Galt discusses what’s been driving New Zealand’s economy out of last year’s recession ahead of Q1 GDP data next week.
5 things to know in 5 minutes:
Markets are now fully pricing a 25 basis point rate cut by the US Fed in September and another in December, following further signs that tariffs aren’t feeding through strongly to US prices, says ANZ Economist Bansi Madhavani. Producer price inflation was 0.1% in the month of May, following soft CPI data yesterday.
Gold rose following that US inflation data. ANZ Commodities Strategist Soni Kumari says the key driver for gold is now shifting to macro developments, away from incremental news on US-China trade talks.
The US dollar fall overnight is within the context of downside risk increasing for the world’s reserve currency, says ANZ Head of FX Research Mahjabeen Zaman.
In New Zealand, electronic card spending rose slightly in May from April, although spending in retail industries fell 0.2%. ANZ Senior Economist Matthew Galt says flatness in recent months indicates still-soft domestic demand.
India’s annual inflation was 2.8% in May - below market expectations for 3%. ANZ Economist Dhiraj Nim says the key driver for another rate cut is likely lower-than-expected growth rather than inflation.
Cheers,
Alex (standing in for Bernard).
PS: Catch you next week as we look ahead to Australian jobs data, and rate decisions in Japan, the UK and the US.
