The focus of the session was New Zealand, with the release of second quarter inflation data from both StatsNZ and the Reserve Bank of New Zealand. StatsNZ’s official quarterly CPI data came in slightly below median expectations, which is a welcome development. Of course, the 3.3% figure is above the upper end of the RBNZ’s target band of 2-3%.
NZD/USD rose on the day despite the weak CPI result. ANZ revised its forecast for the first rate cut by the RBNZ to November 2024 from February 2025.
Later the same day, the Reserve Bank of New Zealand released its own inflation measure for the second quarter, the “Sectoral Factor Model”, which came in at 3.6% year-on-year, down significantly from 4.2% in the first quarter but of course still well above the upper end of its target range.
US politics continued to take centre stage. As the Trump convention continued, Bloomberg TV interviewed Trump. Of note for those following the economic situation, Trump again promised a big hike in tariffs. Of particular note for traders was Trump’s statement that he doesn’t want the Federal Reserve to cut interest rates until after the election. The Financial Times ran a report under the headline “Donald Trump warns US Fed chairman not to cut rates before election”. Trump has said he doesn’t want to stimulate the economy or Biden before the election. Will Fed Chairman Powell succumb to the threat? I don’t know.
Apart from today’s movements in the NZD, the major exchange rates were fairly stable.
