Inflation is top of mind locally as markets start the new week, with economists predicting New Zealand’s pace of inflation will be near the top end of the Reserve Bank’s 1%-to-3% target band when Statistics New Zealand releases the June quarter consumers price index on Monday.
Across the Tasman, an upcoming speech from Reserve Bank of Australia governor Michelle Bullock on Thursday and minutes from the central bank’s last policy review meeting will feed expectations on whether a rate cut is coming next month.
Meanwhile, US earnings remain in focus with Tesla and Google-parent Alphabet poised to report this week, while Wall Street’s major benchmarks continue to test record highs.
And US commerce secretary Howard Lutnick is confident the White House can reach a trade deal with the European Union before tariffs kick in next month.
Creeping pressure
Wall Street ended Friday mixed with the major bourses near records as the Nasdaq Composite edged up 0.1% and the Dow Jones Industrial Average dipped 0.3% as investors remain sceptical the Federal Reserve will cut interest rates as US inflation data show signs of tariff pressure creeping into higher prices.
Deals have been few and far between for the White House, although US commerce secretary Howard Lutnick said he’s confident of reaching a deal with the European Union before tariffs kick in from August, telling CBS’s ‘Face the Nation’ programme on Sunday that there’s plenty of room for an agreement.
The kiwi dollar traded at 59.63 US cents at 7am in Auckland from 59.51 cents last week ahead of Stats NZ’s June quarter CPI release, which is expected to show the annual pace of inflation accelerated to 2.8% from the 2.5% pace in March.
“Earlier this month, the RBNZ said it expected inflation to increase towards the top end of the 1-3% target range over mid-2025, so in that regard higher inflation won’t surprise, nor get in the way of further easing as long as the bank continues to believe that the move is temporary,” Bank of New Zealand senior markets strategist Jason Wong said in a note.
Managing expectations
Across the Tasman, softer jobs data last week raised expectations the RBA will cut the target cash rate when it meets next month, with the upcoming release of the central bank’s minutes to its last policy meeting and a speech from governor Michelle Bullock anticipated to firm up that view.
The kiwi was unchanged at 91.56 Australian cents.
Corporate earnings season continues in the US this week, with FactSet data showing a strong start with 83% of firms reporting in the first week beating fairly subdued expectations. The major US banks broadly beat expectations in their June quarter results last week, with choppy markets driving increased revenue on their trading desks.
Alphabet and Tesla are among those reporting this week, with the Magnificent 7 megacap stocks key drivers of the broader market.
The antipodes are poised for a soft start to the week, with Australian futures pointing to a 0.6% decline when the S&P/ASX 200 index opens.
The kiwi dollar fell to 88.24 yen at 7.45am from 88.75 yen at 7am in Auckland and 88.50 yen last week as investors digest the outcome of Japan's election showing the ruling Liberal Democratic Party and coalition partner Komeito are poised to lose their majority in the parliamentary upper house, having ceded control of the lower in October. Prime minister Shigeru Ishiba said he plans to stay on as leader after the soft showing in the election.
Japanese markets are closed for the Marine Day public holiday.
Reporting by Paul McBeth. Image from Tanay Vora on Unsplash.