Chaotic US policymaking tests investor nerves

Kia ora,

Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

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

Today we lead with news the US dollar fell for a fourth consecutive session today, sliding to its lowest level since February 2022. It's a -3.5% devaluation in just one week. Some think the US Administration is engineering the fall to bolster its export competitiveness as the US factory sector misfires, tariffs aren't working other than raising costs, and to put pressure on the Fed ahead of its meeting next week.

First up today however there was another dairy Pulse auction earlier this morning and that brought some interesting signals. The WMP price came in almost identical to last week's full auction and has been holding at this higher level since the start of 2026 when it made that 7%-plus jump. The SMP price rose a strong +5.9% today from last week, and is now +9% higher than what is was at the end of 2025.. Positive signs, but somewhat undermined by the fast-falling USD.

In the US, the weekly ADP employment update recorded a weekly gain of under +8000, continuing the slow easing that they have been recording since the end of November. January non-farm payrolls which will be released at the end of next week, is currently expected to show a very tame +40,000 jobs gain which will continue the weak run that started in May 2025.

And that may be optimistic, The Conference Board's consumer sentiment survey for January reported that confidence collapsed to lowest point since 2014, to levels even lower than the pandemic depths. It is now back to levels as it rose from the GFC.

But the latest factory survey, this one by the Richmond Fed in the mid-Atlantic states, showed little-change from its already negative levels. New order levels rose marginally however, but because that is on a dollar basis it might just be because the same survey shows high price increase activity, required by even higher cost increase levels.

More positive was the January Dallas Fed services survey, which moved up into positive territory in January after four months of consecutive retreat.

Today's US Treasury 5yr Note auction brought the same median yield rise from the prior equivalent event a month ago. Higher risk premiums are getting embedded

In China, industrial profits rose +5.3% in December from the same month a year ago. They will be pleased with that because for the whole of calendar 2025 they were up merely +0.6% (and would have declined but for the December rise).

In India, we can confirm the signing of their big trade deal with the EU, removing both tariff and non-tariff barriers.. The US isn't happy.

In Europe, we should note that Swedish officials are looking at what it would take to ditch the krona in favour of the euro. An independent review has already pointed out that the benefits would greatly outweigh the costs. The Swedes last voted on this issue in 2003.

In Australia, business sentiment as measured by the NAB survey, was stable and mildly positive in December. Business conditions however improved more strongly on better sales and margins.

Later today, Australia will publish its December CPI result, and after the strong labour market for January, will be closely followed and could very well move financial markets. They had 3.4% inflation in November and this December result is expected to be 3.6%. This will be very influential on the RBA's deliberations at next Tuesday's cash rate target review.

The UST 10yr yield is now just on 4.23%, up +2 bps from this time yesterday.

The price of gold will start today at US$5087/oz, unchanged from yesterday and holding at its record high. Silver is down to US$107/oz. Platinum has fallen more sharply and now at US$2522, down -US$335/oz from yesterday.

American oil prices are up +US$1 at just under US$62/bbl, while the international Brent price is softish, now just under US$67/bbl and up a bit more. This is all USD devaluation-driven.

The Kiwi dollar is up +50 bps from yesterday, now at 60.2 USc as the greenback goes into another devaluation stage. Against the Aussie we are down -10 bps at 86.3 AUc. Against the euro we are also down -20 bps at just on 50.2 euro cents. That all means our TWI-5 starts today just under 63.7, and up +20 bps from yesterday, its highest since late September.

The bitcoin price starts today at US$88,576 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been low at just under +/- 0.9%.

You can 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 tomorrow.