US Fed Extends Operation Twist, Greece Government formed

The US Federal Reserve ended its 2 day meeting by announcing that it is extending its Operation Twist Program by a further USD 267 billion through to the end of the year as Ben Bernanke and his team of policy makers lowered their outlook for growth and employment. It sighted slower growth in household spending, elevated unemployment and depressed housing as the main factors for extending the program. Chairman Bernanke also stated that if the labour market did not pick up they will be prepared to take additional steps if appropriate, (the market is now looking for QE3 in August).

In Greece, New Democracy leader Antonis Samaras was sworn in on Wednesday, as the leader of the newly formed coalition government. The coalition, which will have 179 of the 300 parliamentary seats, is made up of New Democracy, Pasok and Democratic Left. The newly formed government will now focus on renegotiating the austerity measures and remaining in the Euro. Also in Europe, it is worth noting that the yield on Spanish 10 year bonds fell 27 basis points to 6.77%, below the 7.0% unsustainable threshold in renewed hope that Europe will take action to help the struggling nation. German Chancellor Angela Merkel said that the two backstop funds the ESM and the EFSF could be used to buy Government debt of troubled nations.

In NZ the current account deficit for Q1 widened as dairy exports prices fell whilst the nation imported more fuel. Also weighing on the deficit were higher Bank profits being sent back to Australia.
Today we have Q1 GDP growth data out for NZ at 10.45 with the market looking for a +0.50% quarterly increase which would be a small improvement over the +0.3% in Q4 last year. We still see NZ on track for 2012 growth of circa +2.0%.

In the markets, against the USD, the Kiwi is just shy of the .7950 level whilst the Kiwi has dropped back slightly vs. the Australian dollar to be just over .7800. The Kiwi has made further gains vs. the Japanese Yen as the markets anticipates further intervention from the Bank of Japan next week ahead of the end of the quarter.

Fed actions to support growth