NZ Central Bank Cuts Cash Rate By 25 Bps To 2.25%

Summary:

New Zealand's central bank cut its benchmark official cash rate by 25 basis points to 2.25% on Wednesday, its lowest level since mid-2022, as policymakers extended their efforts to revive a struggling economy and mitigate global headwinds.

The decision matched a Reuters poll in which all but four of the 36 economists surveyed forecast the Reserve Bank of New Zealand would cut the cash rate by a quarter point.

The central bank, which surprised markets by slashing rates by a bigger-than-expected 50 basis points in October, has delivered 325 basis points worth of easing since August 2024 to shore up an economy that has contracted in three of the last five quarters.

Source: Investing

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Justin

Forex

Economic

Key Points:

· USD/JPY traders brace for key Japan wage signals and US data as shifting BoJ–Fed expectations threaten the pair's recent bullish momentum.

· Rising pay expectations from Japan's wage talks strengthen bets on a December BoJ hike, increasing downside pressure on USD/JPY.

· Cooling US labor data and rising jobless claims could amplify Fed cut expectations, pushing USD/JPY toward the 155–150 zone.

USD/JPY traders brace for a crucial mid-week session on Wednesday, November 26, as markets adjust bets on BoJ and Fed monetary policy stances.

Early updates from Japan's annual wage negotiations for 2026 suggest another substantial pay hike, supporting a December BoJ rate hike. BoJ Governor Kazuo Ueda recently underscored the importance of annual wage negotiations, commonly known as Shunto. He stated that more data would be needed from wage discussions to assess whether US tariffs would force firms to limit wage hikes.

Meanwhile, US economic data and FOMC members have fueled speculation of a December Fed rate cut, signaling a potential narrowing of US-Japan rate differentials, and favoring the yen. Monetary policy divergence could materially alter USD/JPY's recently bullish trajectory, placing a greater emphasis on incoming data.

Japan Leading Economic Index in Focus

On Wednesday, November 26, Japan's Leading Economic Index (LEI) will provide insights into business and consumer sentiment at the end of the third quarter. Economists expect the LEI to rise from 107.0 in August to 108.0 in September.

A higher LEI reading could point to increased business investment and higher wages, aligning with updates from wage negotiations. Crucially, higher wages could boost households' purchasing power, leading to higher spending and rising demand-driven inflation. Furthermore, improving consumer sentiment may also translate into an upswing in private consumption.

For context, the LEI dropped to 104.2 in April, its lowest level in two years before edging higher. LEI trends reflected trade developments. These trends suggest a September pickup, given that the US lowered tariffs on Japanese goods to 15% in September. The softer yen could also lift sentiment, given that USD/JPY strength would offset the effect of tariffs on company profit margins.

FX Empire – Japan Leading Economic Index

With the BoJ's focus on wages and inflation, improving sentiment would support a more hawkish BoJ rate path and a stronger yen. Notably, USD/JPY briefly dropped below 156 this week. Traders reacted to updates from Japan's wage negotiations and softer US economic data.

USDJPY – Daily Chart – 261125 – Fiscal Stimulus and Dovish Fed

Pre-US Holiday and Fed Speakers Expose US Dollar to Potential Reversal

Amid rising bets on a December BoJ rate hike, US jobs data could boost bets on a December Fed rate cut, potentially sending USD/JPY sharply lower.

Economists forecast initial jobless claims to rise from 220k (week ending November 15) to 227k (week ending November 22). A larger-than-expected increase could bolster bets on a December rate cut, weighing on demand for the US dollar. A potential narrowing in US-Japan interest rate differentials could push USD/JPY toward 155.

For context, the ADP reported a 13.5k 4-week average drop in employment, signaling a cooling labor market. A third consecutive decline in the 4-week average sent USD/JPY lower, highlighting the pair's likely response to higher jobless claims.

Beyond the data, traders should monitor FOMC members' speeches. Reaction to US economic data and views on the timeline for cutting rates will influence USD/JPY trends. Growing calls for a December cut could accelerate the pair's fall toward 150.

USD/JPY Scenarios: Diverging Monetary Policies

· Bearish USD/JPY Scenario: Hawkish BoJ chatter, strong Japanese data, weaker US data, and dovish Fed rhetoric could drag USD/JPY toward 150.

· Bullish USD/JPY Scenario: Dovish BoJ comments, weaker Japanese data, stronger US data, and hawkish Fed chatter could send USD/JPY toward 160.

USDJPY – Daily Chart – 261125

Key Market Drivers to Watch Today:

· Bank of Japan commentary.

· Japanese data.

· US data.

· Fed speakers.

Source: FX Empire

To stay updated on all economic events of today, please check out our Economic calendar

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Olivia Brooks

Economic

Australia's core inflation came in stronger than anticipated in October, suggesting the Reserve Bank will remain on the sidelines as it tries to assess whether the economy is running beyond its speed limit.

The currency gained as the closely-watched trimmed mean gauge of consumer prices, which shaves off volatile items, advanced 3.3% from a year ago, data from the Australian Bureau of Statistics showed Wednesday. That's above the top of the RBA's target band and compared with a forecast 3% increase.

The headline number came in at 3.8%, also exceeding a forecast 3.6% increase.

The Australian dollar advanced 0.2% and the yield on policy sensitive three-year government notes climbed 6 basis points. Money markets see a slim chance the RBA will cut next year while economists generally expect a reduction around mid-2026. Goldman Sachs Group Inc. and Commonwealth Bank of Australia are among a handful that reckon the easing cycle has ended.

The data supports the RBA's assessment that its efforts to rein in core inflation have hit an airpocket at a time when the economy is showing signs of gaining momentum. The central bank aims to keep inflation around the midpoint of its 2–3% range.

This is the inaugural release of monthly inflation data, replacing a previous partial monthly CPI indicator. Still, the quarterly inflation report is set to remain the key reading for policymakers until they're confident that any bugs in the new monthly release have been ironed out.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

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Olivia Brooks

Political

Russia-Ukraine Conflict

U.S. President Donald Trump said on Tuesday that a deal to end the war in Ukraine is "getting very close," though he did not provide specific details about the potential agreement.

"We're going to get there," Trump told attendees at a White House event.

His comments came after a Ukrainian official earlier expressed support for the framework of a peace agreement with Russia, while noting that some sensitive issues still need to be resolved.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Source: Investing

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Manuel

Political

Russia-Ukraine Conflict

US presidential envoy Steve Witkoff, fresh from the triumph of the Gaza peace deal, held a phone call last month with a senior Kremlin official to suggest they work together on a similar plan for Ukraine — and that Vladimir Putin should raise it with Donald Trump.

In an Oct. 14 phone call that lasted a little over five minutes, Witkoff advised Yuri Ushakov, Putin’s top foreign policy aide, on how the Russian leader should broach the issue with Trump. His guidance included suggestions on setting up a Trump-Putin call before Volodymyr Zelenskiy’s White House visit later that week and using the Gaza agreement as a way in.

“We put a 20-point Trump plan together that was 20 points for peace and I’m thinking maybe we do the same thing with you,” Witkoff told Ushakov, according to a recording of the conversation reviewed and transcribed by Bloomberg.

“This story proves one thing: Special Envoy Witkoff talks to officials in both Russia and Ukraine nearly every day to achieve peace, which is exactly what President Trump appointed him to do,” White House communications director Steven Cheung said.

Kremlin spokesman Dmitry Peskov didn’t immediately respond to comment.

The conversation for the first time offers direct insight into Witkoff’s recent tactics for negotiating with Russia and what appears to be the genesis of the 28-point peace proposal that emerged earlier this month – which the US has pushed Ukraine to accept as the basis of a deal.

Putin said this month he believed the US plan could be used as the basis for a peace settlement. He told senior officials at a meeting of the Russian Security Council that the 28-point plan had not been discussed in detail yet with the US, but that Moscow had received a copy of it.

Trump said Tuesday he was directing Witkoff to meet with Putin, in the hopes of finalizing a peace plan.

“The original 28-Point Peace Plan, which was drafted by the United States, has been fine-tuned, with additional input from both sides, and there are only a few remaining points of disagreement,” the president said in a post on Truth Social.

At the time of the Witkoff-Ushakov call, Trump was basking in the success of his drive to end the war in Gaza. The day before, he’d become the first US president to address the Israeli Knesset since 2008 after securing the release of the final 20 living hostages held by Hamas.

Trump’s attitude toward Putin, however, appeared to be souring. As he prepared for his meeting with Zelenskiy on Oct. 17, he was considering providing Ukraine with longer-range Tomahawk missiles, discussing fresh sanctions on Russia and voicing his frustration with Putin.

“I don’t know why he continues with this war,” Trump said Oct. 14, the same day that Witkoff spoke with Ushakov. “He just doesn’t want to end that war. And I think it’s making him look very bad.”

During his call with Ushakov, Witkoff told his Russian counterpart that he had deep respect for Putin and that he had told Trump that it was his belief that Russia has always wanted a peace deal. The US envoy mentioned Zelenskiy’s upcoming visit and suggested that Putin could speak to Trump ahead of that meeting.

“Zelenskiy is coming to the White House on Friday,” Witkoff said. “I will go to that because they want me there, but I think if possible we have the call with your boss before that Friday meeting.”

Ushakov asked Witkoff whether it would be “useful” for Putin to call Trump. Witkoff said it would.

He also recommended that Putin congratulate Trump for the Gaza peace deal, say that Russia had supported it and that he respects the president as a man of peace. “From that, it’s going to be a really good call,” Witkoff said.

“Here’s what I think would be amazing,” Witkoff then added. “Maybe he says to President Trump: you know, Steve and Yuri discussed a very similar 20-point plan to peace and that could be something that we think might move the needle a little bit, we’re open to those sorts of things.”

Ushakov appeared to take some of the advice on board. Putin “will congratulate” and will say “Mr Trump is a real peace man,” he said.

Trump and Putin held their call two days later, at Russia’s request, and the US president described the two-and-a-half-hour-long conversation as “very productive.” Afterward, he announced plans to meet with the Russian leader in Budapest, a summit that is yet to take place, and also mentioned that Putin had congratulated him on the Gaza deal.

Following up on that call, Witkoff met with Kirill Dmitriev, another senior Kremlin adviser, in Miami, according to an interview that Dmitriev gave to Axios. Dmitriev told Axios he spent three days in Miami from Oct. 24. A spokesperson for Dmitriev declined to comment.

On Oct. 29, Dmitriev and Ushakov spoke by phone in Russian and debated how strongly Moscow should push for its demands in any peace proposal, according to another recording reviewed by Bloomberg.

As the two Putin aides considered various options, Ushakov argued for asking for “the maximum” in their submissions to the White House.

He said he was concerned the US might misinterpret any proposals and might take something out but then claim there was an agreement, and that would risk the end of the negotiations, he told his colleague.

Dmitriev, who also heads the Russian Direct Investment Fund, suggested sharing a paper informally and said he was confident that even if the US didn’t completely take Russia’s version they would at least do something very close to it.

He later assured Ushakov that he would stick to what he was told to say, and that Ushakov could also discuss the paper later with “Steve.”

Bloomberg has been unable to confirm exactly what proposals Russia shared with the US and the extent to which they shaped the final 28-point blueprint.

Since then, however, Ukraine has come under severe pressure to accept the proposal that Witkoff drafted with the help of his Kremlin counterparts. US officials had threatened to shut off critical intelligence support to the Ukrainian military if Zelenskiy refused to accept the proposal, although Kyiv has since won some concessions and persuaded the US to slow down following talks with Secretary of State Marco Rubio Sunday.

Under the terms first proposed by the US earlier this month, Ukraine would have to withdraw troops from parts of the eastern Donbas region that Russia has failed to capture through military force. The area would become a neutral demilitarized buffer zone internationally recognized as Russian.

Moscow would also obtain de facto recognition of Russian claims to the regions of Crimea, Luhansk and Donetsk. Most of the remainder of the front line, including in Kherson and Zaporizhzhia, would be effectively frozen. Ukraine and its European allies have insisted that the war should cease along current lines.

Those are some of the conditions that Witkoff and Ushakov appear to preview during their call last month.

“Me to you, I know what it’s going to take to get a peace deal done,” Witkoff said. “Donetsk and maybe a land swap somewhere. But I’m saying instead of talking like that, let’s talk more hopefully because I think we’re going to get to a deal here.”

“The president will give me a lot of space and discretion to get to the deal,” he added. “So if we can create that opportunity that after this I talked to Yuri and we had a conversation I think that could lead to big stuff.”

“Ok,” Ushakov replied. “That sounds good.”

Source: Bloomberg

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Manuel

Stocks

Since the launch of ChatGPT three years ago, analysts and technologists — even a Google engineer and the company’s former chief executive officer — have declared Google behind in the high-stakes race to develop artificial intelligence.

Not anymore.

The internet giant has released new AI software and struck deals, such as a chip tie-up with Anthropic PBC, that have reassured investors the company won’t easily lose to ChatGPT creator OpenAI and other rivals. Google’s newest multipurpose model, Gemini 3, won immediate praise for its capabilities in reasoning and coding, as well as niche tasks that have tripped up AI chatbots. Google’s cloud business, once an also-ran, is growing steadily, thanks in part to the global rush to develop AI services and demand for compute.

And there are signs of rising demand for Google’s specialized AI chips, one of the few viable alternatives to Nvidia Corp.’s dominant gear. A report on Monday that Meta Platforms Inc. is in talks to use Google’s chips sent shares of its parent Alphabet Inc. climbing. The stock has added nearly $1 trillion in market capitalization since mid-October, helped by Warren Buffett taking a $4.9 billion stake during the third quarter and broader Wall Street enthusiasm for its AI efforts.

Alphabet shares rose 1.5% to $323.44 in New York on Tuesday, sending the company’s market capitalization near $4 trillion.

SoftBank Group Corp., one of OpenAI’s biggest backers, fell 10% Tuesday on worries about the competition from Google’s Gemini. Nvidia shares dropped 2.6%, erasing $115 billion in market value.

“Google has arguably always been the dark horse in this AI race,” said Neil Shah, analyst and cofounder at Counterpoint Research. It’s “a sleeping giant that is now fully awake.”

For years, Google executives have argued that deep, costly research would help the company fend off rivals, defend its turf as the leading search engine and invent the computing platforms of tomorrow. Then ChatGPT came along, presenting the first real threat to Google search in years, even though Google pioneered the tech underpinning OpenAI’s chatbot. Still, Google has plenty of resources that OpenAI doesn’t: a corpus of ready data to train and refine AI models; flowing profits; and its own computing infrastructure.

“We’ve taken a full, deep, full-stack approach to AI,” Sundar Pichai, CEO of Google and Alphabet, told investors last quarter. “And that really plays out.”

Any concerns that Google might be held back by regulators are dying away. The company recently avoided the most severe outcome from a US anti-monopoly case — a breakup of its business — in part because of the perceived threat from AI newcomers. And the search giant has shown some progress in the longtime effort to diversify beyond its core business. Waymo, Alphabet’s driverless car unit, is coming to several new cities and just added freeway driving to its taxi service, a feat made possible by the company’s enormous research and investment.

Some of Google’s edge comes from its economics. It’s one of the few companies that produces what the industry calls the full stack in computing. Google makes the AI apps people use, like its popular Nano Banana image generator, as well as the software models, the cloud computing architecture and the chips underneath. The company also has a data goldmine for constructing AI models from its search index, Android phones and YouTube — data that Google often keeps for itself. That means, in theory, Google has more control over the technical direction of AI products and doesn’t necessarily have to pay suppliers, unlike OpenAI.

Several tech companies, including Microsoft Corp. and OpenAI, have plotted ways to develop their own semiconductors or forge ties that make them less reliant on Nvidia’s bestsellers. For years, Google was effectively its own sole customer for its homegrown processors, called tensor processing units, or TPUs, which the company first designed more than a decade ago to speed up the generation of search results and has since adapted to handle complex AI tasks. That’s changing. AI startup Anthropic said in October said it would use as many as 1 million Google TPUs in a deal worth tens of billions of dollars.

On Monday, tech publication the Information reported that Meta planned to use Google’s chips in its data centers in 2027. Google declined to address the specific plans, but said that its cloud business is “accelerating demand” for both its custom TPUs and Nvidia’s graphics processing units. “We are committed to supporting both, as we have for years,” a spokesperson wrote in a statement.

Meta declined to comment on the report on Monday night.

“We’re delighted by Google’s success,” a spokesperson for Nvidia said in a statement Tuesday. “They’ve made great advances in AI, and we continue to supply to Google.” The spokesperson added: “Nvidia is a generation ahead of the industry – it’s the only platform that runs every AI model and does it everywhere computing is done.”

Analysts read the Meta news as a signal of Google’s success. “Many others have failed in their quest to build custom chips, but Google can clearly add another string to its bow here,” Ben Barringer, head of technology research for Quilter Cheviot, wrote in an email. Google, the Sleeping Giant in Global AI Race, Now ‘Fully Awake’_1

Google, the Sleeping Giant in Global AI Race, Now ‘Fully Awake’_1

Google has taken risks to get here. In early 2023, Google consolidated its AI efforts under Demis Hassabis, the leader of its London AI lab DeepMind. The reshuffle had some bumps, most notably a botched rollout of an image-generation product. For several years, DeepMind pursued research in areas like protein-folding that led to new commercial strategies (and a Nobel Prize) but contributed little to Google’s bottom line. Under the reorganization, the AI unit is focused almost squarely on foundational models that keep pace with OpenAI, Microsoft and others.

Hassabis, a renowned computer scientist, has helped retain key AI engineers despite multimillion-dollar offers from rivals. His boss, Pichai, has been willing to splurge on talent.

Gemini 3 Pro has risen to the top of closely watched AI leaderboards on LMArena and Humanity’s Last Exam. Andrej Karpathy, a founding member of OpenAI, said it’s “clearly a tier 1 LLM,” referring to large language models. Google pitched the model as one that can solve complex science and math problems, and address nagging issues — such as generating images and overlaid text with incorrect spelling — that might deter enterprise customers from adopting AI services more widely.

Consumer interest is harder to gauge. Google said last week that 650 million people use its Gemini app. OpenAI recently said ChatGPT hit 800 million weekly users. As of October, Gemini’s app had 73 million monthly downloads, well shy of ChatGPT’s 93 million monthly downloads, according to research firm Sensor Tower.

Google is an advertising behemoth, but it has historically struggled to find other commercial models. Its cloud business reported third-quarter revenue of $15.2 billion, up 34% from the prior year. Still, that remains in third-place behind Microsoft and Amazon Web Services, which posted more than double Google’s cloud sales in the most recent quarter. Counterpoint Research’s Shah said Google’s AI adoption with enterprises lags Microsoft and Anthropic.

Meanwhile, OpenAI is targeting profits by selling a premium version of ChatGPT and adjacent software to companies. It’s cutting deals with chipmakers from Broadcom Inc. to Advanced Micro Devices Inc. to Nvidia to support its AI ambitions.

Google’s TPUs are mostly attractive to a handful of companies with big computing bills, like Meta and Anthropic, said Meryem Arik, CEO of the AI startup Doubleword.

And the chip industry is “not a zero-sum game with just one winner,” said Barringer.

For one, AI developers can only access Google’s chips through the company’s own cloud service. They can use Nvidia’s graphics processing units, or GPUs, more flexibly. “As soon as you use TPUs, you’re locked into” the Google cloud ecosystem, said Arik.

Being tied to a single supplier might have been something companies avoided. That’s no longer the case for Google, thanks to its advances in AI.

“It’s definitely fair to say that Google is back in the game with Gemini 3,” said Thomas Husson, analyst at Forrester. “In fact, to paraphrase a quote attributed to Mark Twain, reports of Google’s death have been widely exaggerated, not to say irrelevant.”

Source: Bloomberg

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Manuel

Bond

Central Bank

Treasuries gained, pushing the 10-year yield to 4% for the first time in a month, after White House National Economic Council Director Kevin Hassett emerged as the front-runner to serve as the next Federal Reserve chair.

Yields dipped across tenors with the benchmark 10-year’s slipping two basis points to 4%, the lowest level since the Fed’s meeting in late October.

Hassett is seen by Trump’s advisers and allies as leading the race to replace Jerome Powell, Bloomberg News reported, citing people familiar with the matter.

“The argument will be a weaker US dollar, lower front-end rates from May’s meeting onwards and steeper curves,” said Jordan Rochester, a head of macro strategy at Mizuho in London. Hassett is “a credible economist by background, previously working at the Fed as a senior economist, but some may argue his closeness to Trump makes him the patsy.” Traders Push US 10-Year Yield to 4% as Hassett Tops Fed Field_1

Traders Push US 10-Year Yield to 4% as Hassett Tops Fed Field_1

The dollar slipped to a session low following the news, before paring the loss.

The move in Treasuries began earlier in the day after the release of data affirming labor-market weakness and a slump in oil prices.

Federal Reserve Governor Stephen Miran bolstered the outlook for rates by reiterating his view that the US economy needs large reductions. The Fed normally moves rates in increments of 25 basis points but has made moves of 50 basis points or more on occasion.

The addition of Hassett would give the Fed board two voting members — with Miran — “starting in June who are going to be arguing pretty proactively for 50, and the Fed chair generally gets what he wants unless there’s a strong argument otherwise,” said David Robin, an interest-rate strategist at TJM Institutional Services LLC.

“Hassett elevates the probability that the first one or two moves in the post-Powell regime are going to be 50,” he said.

Treasury Secretary Scott Bessent is leading the process to find a replacement for Powell, whose term as chair ends in May. Trump is expected to make an announcement by Dec. 25, with five candidates in the running.

Bessent said on CNBC that a key theme of his interviews has been simplifying the US central bank, which he indicated has become too complex in how it manages money markets.

Treasuries held their gains following the $70 billion auction — the biggest of the US government’s seven monthly fixed-rate debt auctions. The 3.562% auction result was slightly higher than the yield just before the 1 p.m. New York time bidding deadline.

With the hangover from the six-week US government shutdown that ended Nov. 12 continuing to delay official economic data, a debate over the likelihood of another Fed rate cut next month has turned on industry data such as ADP Research’s private payrolls gauges. For the four-week period ending Nov. 8, ADP reported an average drop of 13,500.

Market-implied expectations for a quarter-point rate cut on Dec. 10 held steady, with around 20 basis points of the move, close to 80%, priced in.

“The labor market is certainly softening and therefore getting ahead of it makes a little bit of sense,” Krishna Memani, chief investment officer at Lafayette College, said on Bloomberg Television. At the same time, the elevated inflation readings that some Fed policymakers say warrant pausing in December mean that 10-year Treasury yields “cannot drop too much even when growth is slowing.”

The Census Bureau and the Bureau of Labor Statistics released retail sales and producer prices data for September, more than a month later than originally scheduled, that were broadly in line with economist estimates. Neither elicited much market reaction.