Ahead of US June CPI data tonight, market bets are firm for a September cut by the Fed. The New Zealand dollar tumbles as markets see the Reserve Bank pivot towards a first cut, and there are official rates decisions today in Korea and Malaysia.
In our bonus deep dive interview, ANZ New Zealand Chief Economist Sharon Zollner discusses the importance of next week’s Kiwi CPI after a dovish turn by the RBNZ yesterday.
5 things to know:
Bets for a September start to Fed rate cuts rose overnight to 77% from 73% after the second day of Congressional testimony by chair Jerome Powell, who told lawmakers that inflation did not need to go below 2% before rate cuts could start. US June CPI data tonight is now crucial. ANZ Head of FX Research Mahjabeen Zaman is expecting core CPI to rise 0.2% in the month.
New Zealand’s Reserve Bank held its OCR at 5.5% yesterday. That was expected, but it was a perceived dovish pivot which sent the Kiwi dollar down. ANZ New Zealand Chief Economist Sharon Zollner says markets were looking for any type of signal for earlier rate cuts they could find.
The yield on New Zealand two-year government bonds fell 14 basis points as markets priced in more than one full OCR cut before November this year. The RBNZ’s last batch of forecasts in May showed the OCR on hold until August 2025. Sharon says she doesn’t think the Reserve Bank would view what they said yesterday as a pivot.
The Korean and Malaysian central banks have rate reviews today. ANZ Economist Arindam Chakraborty says Malaysian rates look set to stay on hold at 3% for the rest of 2024. But in Korea, ANZ Economist Krystal Tan is expecting to see a gradual shift towards easing.
China’s June CPI rose 0.2% from a year ago, half the market expectation and below May’s 0.3%. The annual change in producer prices remained negative. ANZ Senior China Strategist Zhaopeng Xing says that’s due to weak domestic demand.
Cheers
Bernard
PS: Catch you tomorrow with that US June CPI data.
