Fed holds; Canada housing starts drop; Mexico inflation cools; China posts jump in exports; EU data soft; AU banks warn on regulatory overreach; UST 10yr at 3.22%; oil and gold fall; NZ$1 = 67.8 USc; TWI-5 = 72.1

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Here’s our summary of key events overnight that affect New Zealand, with news the big Aussie banks are warning of the risks of regulatory overreach.

But first, the US Federal Reserve has left its federal funds rate unchanged at 2% to 2-1/4% as expected, citing “realized and expected labor market conditions and inflation.”

Canadian housing starts fell -5% in October as groundbreaking on multiple unit urban homes climbed +17%, but were more than offset by a bigger drop in single-detached urban starts.

In Mexico, they are reporting a dip in their inflation rate below +5% in October from September. A year ago that inflation rate was +6.4%.

Another month, another strong Chinese export performance, another round of claims this is only because American importers are trying to beat tariffs. The problem is, those tariffs became effective on September 24, 2018 and this data is for October. China’s exports surged again last month, up more than +15% year-on-year and the largest gain of 2018 on the back of resilient demand, defying many economists’ expectations for a slowdown from the trade fight with the United States. Additional American tariffs kick in at the start of 2019.

Things aren’t so good in Germany, with their trade balance slipping on a slip in exports, slightly more than expected. The data released overnight was for September.

In fact, the EU says their economy will cool in 2019 and the coming years as global demand for the bloc’s exports wanes, with a sharper slowdown possible if the American economy overheats or trade tussles escalate. And ECB President Mario Draghi urged eurozone governments to pay down their national debt to build resilience against potential economic shocks, such as the looming Brexit.

Overnight, the Swiss reviewed their official interest rate settings, and like the RBNZ indicated its level isn’t going anywhere soon.

In Australia, the big four banks have launched a strong defense of vertical integration, lending benchmarks and executive bonuses, in response to the Hayne royal commission interim report. You can read their arguments here. (ANZ, CBA, NAB, Westpac.) Basically they are saying making it harder for consumers to get loans from banks will push consumers into unregulated shadow banks, and make the issues much worse.

The UST 10yr yield is firmer at 3.22%. Their 2-10 curve is now just on +27 bps. The Aussie Govt 10yr is at 2.77% (up +4 bps), the China Govt 10yr is at 3.51% and down -1 bp, while the NZ Govt 10 yr is now at 2.81% and up +4 bps too.

Gold is down -US$5 overnight to US$1,223/oz.

US oil prices have fallen sharply today, by more than -US$1/bbl to under US$61/bbl, while the Brent benchmark is now just under US$71/bbl. These are seven month lows and should start showing up at the pump soon. When crude oil was last this low, we were paying NZ$2.13/L at the pump, discounted. (But of course an Auckland +11.5c new tax has been imposed since then.) In fact, the drop in crude oil prices is more than -20%, so this commodity is in a bear market.

The Kiwi dollar is starting today at its new higher level of 67.8 USc. On the cross rates we are at 93.1 AU, and at 59.4 euro cents. That leaves the TWI-5 at 72.1 and where it was this time yesterday.

Bitcoin is now at US$6,436 which is down -1.4% from this time yesterday. This rate is charted in the exchange rate set below.

This chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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Source: CoinDesk

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