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Moving out, moving up

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  • The US Federal Reserve was broadly unchanged in its policy statement overnight - a balance of tweaks leaving the central case of a June tightening intact. Today we get household formation data - markets are not likely to pay too much attention, but that is misguided. Better household formation will drive growth higher.
  • Oil prices remain subdued; our oil team revised down their oil price estimate for this year. German consumer prices today will show oil's impact as a relative price change, not as a general (deflation) price change. Relative oil price moves and strong employment data are a clear stimulus for Germany.
  • Japanese retail sales were unexpectedly weak again - these are nominal figures, so oil prices have an impact (though yen denominated oil price moves are less dramatic); however the consumption tax increase should raise nominal retail sales.
  • The Reserve Bank of New Zealand left rates unchanged, but removed the tightening bias from the language of its accompanying policy statement. We do not see a rate cut however, as the stimulus of lower oil prices should make that unnecessary.