The US Fed tightens without rate hikes; US jobless claims fall; US productivity rises; air travel booms; car sales jump; BofE holds; UST 10yr yield at 2.46%; oil and gold lower; NZ$1 = 73 US¢, TWI-5 = 78.1

Here's my summary of the key events overnight that affect New Zealand, with news of booming travel worldwide.

But first, it seems that yesterday's non-action by the US Fed on the official interest rate has masked some real, long-term action by the Fed. It was highlighted by a footnote in her January 19 speech, "the most talked about footnote" ever in a Yellen announcement. (See footnote 17 here.) It says that the Fed is tightening monetary policy without raising interest rates by allowing the maturity of their bond portfolio to shorten. She says this will have the same impact as two 25 bps rate hikes in 2017. Rates are going up even though the Fed may not raise their benchmark.

The number of Americans filing for jobless benefits fell more than expected last week to be more than -10% below the same data a year ago, pointing to a tightening labour market that should support their economy this year.

American worker productivity rose for a second consecutive quarter to round out 2016, reversing a long stretch of declines, but the broader trend remains weak. Nonfarm business productivity, measured as the goods and services produced by workers per hour, increased at a +1.3% rate in the fourth quarter. The gain is slightly more than the average increase over the past decade, but is a sharp slowdown from third-quarter’s strong and upwardly revised +3.5% advance.

Around the world, air travel is truly booming. The latest data for 2016 shows it up +6.2% in 2016, led by higher than +10% rises in the Asia Pacific, Europe and the Middle East. International traffic levels grew +6.7%. December alone grew +9.7% for international flights. We are leading that; Auckland Airport traffic grew +13.1% in December.

Not only are we travelling by air, we are buying new cars at a very fast rate too. The January New Zealand new car data is out and a normally quiet month smashed all records for a January. Car sales were up more than +10% from the same month a year ago and broke through the 10,000 level for the first time ever for this month. Local commercial vehicle sales were a record too.

The Bank of England held its benchmark interest rate and all other policy positions, but it did raise its growth forecast for the UK to a lowly +2% in 2017, but less in further out years. The British currency fell on the news.

In New York, the UST 10yr yield is lower in mid-day trading and now at 2.46%.

Oil prices are about US$1 higher today than this time yesterday, now just under US$54 for the US benchmark, while the Brent benchmark is just under US$57 a barrel.

The gold price is higher too, up US$14 and now at US$1,217/oz

The New Zealand dollar is higher as well as the greenback has slipped and now at 73 US¢. On the cross rates we are at 95.2 AU¢, and against the euro at 67.6 euro cents. The NZ TWI-5 index is up slightly to 78.1.

If you want to catch up with all the changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».