A stable crypto currency system coming 'soon'

Kia ora,

Welcome to Friday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news central banks are moving to design a stable crypto currency system.

In a week of wild-west volatility in the unregulated crypto markets, the US Fed has signaled it will have a lot to say soon about central bank digital currencies. They want to play “a leading role” in the development of international standards. Central banks around the world - most notably the People’s Bank of China - are moving ahead with digital currencies which could give them a head-start in how standards develop.

US jobless claims fell slightly more than expected to 454,000 last week, taking the total to just under 3.7 mln on these programs and the lowest since the start of the pandemic. In the equivalent week in 2020 there were 21.2 mln people on these programs. In 2019 it was 1.7 mln, so they still have a long way to get back to pre-pandemic levels.

The next regional Fed survey of manufacturers, this one from the Philly Fed region for May, has come in still very positive but a sharp downgrade from their prior April survey. New order levels and activity levels reduced, and price increases hit a 40 year high after sharp jumps. Although they are dealing with faster and widespread price increases, most firms remain optimistic.

The US Treasury offered US$13 bln in TIPS inflation-protected bonds today attracting US$32 bln in bids. The Fed took none. The median yield fell from -0.90% plus CPI from -0.63% at the prior equivalent event in March (an event in which the Fed did participate).

In Canada, the ADP employment report for April expanded with a +351,000 new jobs rise although that is a lower pace than the March rise of +635,000 gain. The only sector shrinking there was their IT sector.

Taiwan's export orders rose +43% from the same month a year ago, at first impression perhaps not that impressive given the pandemic base effects? But actually they are up more than +42% above the April 2019 levels which reveals an impressive real gain.

In the EU, they have voted decisively to freeze progress on ratifying in the China-EU investment Agreement (the CAI). Fundamental differences on human rights are behind the move. China's restrained response on the vote - and its complete absence from China media - indicates that Beijing is shaken by the move, one it was banking on.

In Australia, their unemployment rate fell to 5.5% from 5.6% but that was because their participation rate fell. Actually, employment fell by -31,000 which was much worse than the expected +15,000 rise and compares with a March rise of +77,000.

Although there are continuing threats of 'action' by Beijing, commodity prices are staying high even if they are day-to-day volatile. Both copper and iron ore prices are moving back up today. And global aluminium demand is said to be very strong.

The UST 10yr yield starts today down sharply at 1.63% giving up +6 bps from this time yesterday. 

The price of gold starts today up +US$11 from this time yesterday at US$1874/oz. This commodity has also been volatile recently.

Oil prices start today another -US$1.50 lower at just under US$62/bbl in the US, while the international Brent price is just on US$65/bbl.

The Kiwi dollar opens today at 72 USc and little-changed since this time yesterday. Against the Australian dollar we are marginally softer at 92.6 AUc. Against the euro we are unchanged at 58.9 euro cents. That means our TWI-5 starts today still at 73.4.

The bitcoin price is now at US$39,793 virtually unchanged from this time yesterday. Volatility in the past 24 hours has still been extreme however at +/- 10.8%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again on Monday.