RBNZ mulling ways to cool housing market

Today's Highlights

Greece running out of money

RBNZ mulling ways to cool housing market

China is slowing – as the government said it would

IMF warns on global impact of US rate hikes

FX Market Overview

The Reserve Bank of New Zealand is mulling ways to calm the overheated NZ housing market in ways that will not completely kill New Zealand's already limp inflation. So we can all expect tighter lending criteria and or affordability checks and maybe curbs on mortgages for investment properties. Understandably, the NZ dollar slipped after the speech by Deputy Governor Grant Spencer and remains soft this morning.

We also hear overnight that China's economy is slowing. As China is Australia's number one export market and Australia is New Zealand's number one export market, the implications are very clear. We have seen a little weakness in the Australian Dollar overnight but as the figures were exactly as the government had forecast (oddly enough, they always are) the effect was more of a ripple than a tsunami.

The International Monetary Fund is warning of the broad implications of US interest rate hikes. The very cheap funding being afforded to investors across the Americas, in Latin America and in Asia through almost 0% US interest rates has fuelled rises in equities and some commodities. The removal of all that cheap money will have an impact on those markets far from the US borders as well as domestically. Could that be too much of a brake on the global recovery? That is what the IMF is suggesting. In the short term, this afternoon's US industrial production data is forecast to be quite poor so we ought to expect some USD weakness in later trade.

Somewhere that could use some cheap money right now is Greece. Their government funds are almost completely depleted and the drive to agree a way forward with their creditors is increasingly urgent. 24th April is crunch day when they will run out of money unless another tranche of the bailout is released and after that, there will be no money to pay civil service salaries. The euro isn't really reacting to that because the crisis seems to have been with us for eons and because German inflation picked up a little last month but any kind of Greek default would sharpen the focus, so there is certainly room for euro weakness if an agreement is not reached and euro strength if one is finalised. It is unlikely today's ECB decision will move the shared currency because no change will occur.

The Bank of Canada will be in action (or inaction perhaps) later today. There is no expectation of any change in their base rate from the current 0.75% but their press conference could be edifying. Canada has been hit by the fall in energy and commodity prices, so the BOC may well expand on their concerns in that regard.

And as harrowing images are being released of the days in which death camp Bergen-Belsen was recaptured by the allies 70 years ago, Radio 4 had an interview this morning with Gena Turgel, a survivor who went on to marry one of the officers who liberated the camp... and her. Even at the age of 92, it was clear that the memories of what she had seen 70 years ago were are vivid today as they had ever been. It is very hard to drive with tears in your eyes I can tell you.

Quote

"Despite everything, I believe people are really good at heart."
Anne Frank