Official Cash Rate reduced to 3.0 percent in NZ

Compared to the commodities market, the forex market was more relaxed with fewer spikes. The dollar had a tranquil flow yesterday, with no major news with impact on the trading evolution. The Aussie profited from this, with a hike over 0.7440 but a short recovery after, with the release of the latest CPI and RBA’s Governor press conference. RBA announced also a lower inflation than forecasted, reaching 1.5% YoY versus the 1.7% YoY expected by analysts.

The BoE’s Monetary Policy Committee voted with nine out of nine members for maintaining the same monetary policy in July. However, BoE’s expectations are for an inflation rise for the second part of this year, although the current rates are alarmingly close to zero. Revising MPC’s minutes from yesterday, we can see that the decision between raising the base rate at leaving it unchanged was a finely tuned decision among the entire board committee. We can see here a shift from the natural state of decision making, in which only two members had difficulties in being “tuned” carefully.

Another point that should be on our agenda is regarding US, meaning the home resale rate of June, which came up at its highest level in the last eight and a half years. This is most certain a sign of a rise in demand that should offer a good support for recovering on the housing market and also in the overall economy. Speaking of, the National Association of Realtors declared yesterday that existing home sales rose 3.2% to an annual of 5.49 million units, highest since February, 2007.

The report on US home sales came after strong housing starts and a rise in building permits. The high demand of work force is starting to push up the salaries in the field, adding also the increasing demand for housing, especially in the young adults sector; supply still remains a constraint. Despite the drop in retail sales and the setback of job growth from last month, economy still remains firm, the bundle of strong housing indicators boldly stating it.

This morning, the Reserve Bank announced a reduction of 25 basis points for the OCR (Official Cash Rate), the rate reaching 3.0%.

On a global perspective, the economic growth is still moderate, forecasts saying that the take-off will be gradual. Developments in Europe and China increased uncertainty and alleviated volatility on financial markets. It is expected also a contraction of USA’s monetary policy.