Episode Details

Kia ora.

Welcome to Thursday’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 commodity markets are betting all-in that a deal between the US and Iran will unlock the Strait of Hormuz soon. An Iranian State TV report has triggered the optimism. (And even though the US has denied it.)

More ships are transiting, but it is still only a fraction of 'normal'. However it is enough to drive the price of crude oil lower.

But despite all that, financial markets seem to remain unconvinced, or at least they have turned defensive due to what lies ahead of a resolution. How well any deal will stick between the two parties who have become quite transactional remains to be seen. Certainly the US is unlikely to be trusted to maintain the deal by both Iran, and even its own traditional allies. Iran will be Iran, agreeing but preparing for another attack/fight. The one thing the US/Israeli thing has done is solidify the Iranian regime's position at home. It no longer has internal dissent or street challenges, and it will thank Trump for that.

In the US, mortgage applications fell sharply last week, as US 30 year mortgage rates rose. Most of the fall is from the outsized retreat in refinance activity (-18%), although new purchase activity did dip as well. Those mortgage rates rose to their highest level since August 2025.

Meanwhile, the ADP tracking of private payrolls showed the good levels continued last week, even if there was a small dip posted.

And that is supported by factory survey data out from the Richmond Fed for the mid-Atlantic states area. New order levels rose notable. And firms expected growth in prices paid to moderate slightly over the next 12 months. But there was no improvement in the forward expectations, despite these improvements.

Meanwhile the Dallas Fed services sector survey remained quite negative, even if less so in May than in April. But their uncertainty metric is notably less.

There was a US Treasury 5yr Note auction overnight and that delivered a yield of 4.13% (4.18% high), up sharply from the 3.90% yield at the prior equivalent event a month ago.

In Australia,

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