Although he reprises the appearance to the House Financial Services Committee on Wednesday, nothing he said shifted the dial much.
Exactly 50 basis points of Fed easing remains priced in futures for the rest of this year – twice what the Fed itself has indicated. Ten-year Treasuries seem stuck just under 4.3% as some $39 billion of paper goes under the hammer later and following a decent take-up of 3-year notes on Tuesday.
But with Thursday’s June U.S. consumer price update ensuring an eerie calm remains over world markets, leaving U.S. stock benchmarks to eke out another series of record highs yesterday, China’s equivalent price report for last month showed how weak the global goods inflation pulse has become.
China’s consumer price growth barely managed to stay positive for a fifth month in June. At just 0.2%, it was half the annual rate expected and factory gate deflation persisted.
Mainland Chinese stocks resumed their relentless decline after Tuesday’s brief bounce and are back in the red for the year – and, remarkably, 10% below the level they were five years ago. The yuan also edged lower.
What’s more, a typically hawkish Reserve Bank of New Zealand opened the door to monetary easing of its own even as it held policy rates steady on Wednesday. “There are signs inflation persistence will ease in line with the fall in capacity pressures and business pricing intentions,” it said in what was read as a dovish commentary.
The kiwi dollar fell 0.7% as markets priced an earlier start to rate cuts and it hit a 16-month low against the Australian dollar.
Next up on Wednesday is Bank of England chief economist Huw Pill – likely a swing voter in the BoE’s policymaking council. UK markets have grown slightly more confident of a first BoE rate cut as soon as next month now that last week’s election is out of the way – and money markets see a 60% chance of a move on August 1.
The pound was firmer against a steady dollar.
