The dollar weakens ahead of the US CPI

The Reserve Bank of New Zealand

The Reserve Bank of New Zealand (RBNZ) has decided to keep its official cash rate at 5.5%. This decision was widely expected. After the previous RBNZ meeting, its Governor Adrian Orr said the bank was seeing borrowing costs peak at that level. The RBNZ was one of the first banks to withdraw its pandemic-era stimulus and, since October 2021, has hiked rates by a total of 525 basis points.

Now the RBNZ committee says that "the optical character recognition (OCR) will need to remain at a restrictive level for the foreseeable future". Even though inflation has come down in recent months, New Zealand is still dealing with 6.7% inflation.

Minutes from the latest monetary policy committee meeting said it expects inflation to decline to within the central bank's 1% to 3% target by the second half of 2024. Like everywhere else, the fight against inflation has a cost. The New Zealand economy is currently in a technical recession.

The Bank of Canada

This afternoon, the Bank of Canada is seen to have added another quarter of a percentage point to its overnight rate, taking it to 5%. Concerns about inflation have increased in recent weeks. If headline inflation has been almost constantly falling since June last year, core inflation appears to be stickier. The core consumer price index (CPI) has also been falling, but at a slower rate than the main index. The USD continues to weaken ahead of the US consumer price index later today. It now trades at its lowest level since May 8 against the EUR.

Cable

Cable is also rising for a sixth day, closing in on $1.30, a level last seen in April last year. Headline consumer price index (CPI) is expected to decelerate to 3.1% in June YoY, down from 4% in May. Core CPI growth is also expected to slow to 5% after a 5.3% print in May. Since March, the headline CPI figure has been below core inflation.

Nvidia

Energy prices have substantially fallen, but broad-based inflation seems more stubborn. Following last year's abortive attempt by NVIDIA Corp to buy rival chip maker Arm, the latter is now wanting to bring Nvidia in as an anchor investor. That's according to the FT, which says the tactic is to pump prime interest in Arm's spinoff later this year from parent Softbank.

Softbank

SoftBank wants to list Arm in an initial public offering (IPO) in New York, possibly as early as September. Nvidia, which is the world's most valuable semiconductor company, was forced last year to abandon its planned $66 billion acquisition of Arm after the deal was challenged by regulators. SoftBank bought Arm for $32 billion in 2016, a valuation that Softbank aims to double on the sale of the business.

Many private tech companies and their advisers are watching closely to see if Arm can succeed in launching its IPO in 2023 after a year-long slump in new listings.

Oil overview

Oil prices were broadly flat overnight during the Asia Pacific region (APAC) session but rose to a 10-week high yesterday afternoon after the Environmental Impact Assessment (ElA) cut its 2023 US crude oil production forecast. The ElA also added that the oil market should remain tight in the second half of 2023, citing strong demand from China combined with the supply cuts announced recently by Saudi Arabia and Russia. The ElA now expects Brent to average $78 a barrel in July and us to average $80 a barrel after a year-long slump in new listings.

Oil prices

Oil prices were broadly flat overnight during the Asia Pacific region (APAC) session but rose to a 10-week high yesterday afternoon after the ElA cut its 2023 US crude oil production forecast. The ElA also added that the oil market should remain tight in the second half of 2023, citing strong demand from China combined with the supply cuts announced recently by Saudi Arabia and Russia. The ElA now expects Brent to average $78 a barrel in July and up to $80 a barrel in the fourth quarter of 2023.

OPEC

Yesterday, the Organization of the Petroleum Exporting Countries (OPEC) Secretary General Haitham Al Ghais said the organisation was seeing global demand for all forms of energy rise by 23% through 2045 and added that limiting or stopping funding new oil projects was unrealistic and unwise. He also acknowledged the need for technology to tackle continued fossil fuel emissions: "We will require innovative solutions such as carbon capture, utilisation, and storage, and hydrogen projects in addition to a circular carbon economy."