Market Update 27/06/2024

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Stock and bond markets declined as month-end approached. The yield on the US 10-year rose 7 basis points to 4.32%. US new home sales dropped 11.3% month-over-month in May, the sharpest decline in 20 months, indicating that high mortgage rates from restrictive monetary policy are impacting housing demand. The annualized seasonally adjusted rate of 619k brings it back to early 2019 levels. Mortgage rates are currently double what they were in 2021 before the Fed’s rapid monetary tightening. The median price of new homes fell 0.9% year-over-year to $417k. With the available supply of new home sales rising to 481k, the highest since 2008, further price declines seem likely in the coming months.
 
The main focus over the last 24 hours was the Australian CPI, which came in much higher than expected at 4%, driving strong demand for the AUD. The data initially caused a spike in the AUD and, to a lesser extent, the NZD, but the boost for the NZD was quickly reversed.
 
NZDUSD briefly dipped below the 0.6085 support level to an overnight low of 0.6076, but it currently hovers around 0.6080. There might be a risk of testing the 0.6050 support level further, with resistance now at the previous support of 0.6100. This will likely depend on NZ Business confidence data today, but more so on the US PCE and end-of-month and for many year-end balancing.
 
NZDAUD broke through support again after Australia’s CPI data came in stronger than expected and has fallen to a 1 month low just below 0.9140. It’s notable that the AUD has outperformed most currencies, including a strong USD, in the last 12 hours. Support is now at 0.9140, with the next levels at 0.9050 and 0.9015.
 
NZDJPY traded to just under 98.00, while USDJPY easily climbed past 160, facing resistance only at 160.80. This pushed the yen to a new 38-year low against the USD and multi-decade lows against other major currencies. Official intervention to support the yen is seen as likely if it weakens further, but this is expected to happen during illiquid market conditions, possibly after the US PCE deflator data is released on Friday night.
 
In the day ahead, there will be good interest in the ANZ business outlook survey, particularly for the inflation indicators rather than the activity indicators. This evening, the US will release data on trade, jobless claims, durable goods orders, and pending home sales, with special attention to whether the initial jobless claims data confirm an upward trend.
 
Although New Zealand will be on holiday tomorrow, there will be considerable interest in the first US Presidential election debate starting at 1:00 pm NZT. Later, Friday night, the US core PCE deflator is expected to show a modest 0.1% month-on-month increase, with a slight risk of it rounding up to 0.2%.


Here are the latest mid-market rates:

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