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Central banks make their impact of economies of note:

Written by Sam Coxhead on April 5th, 2013.      0 comments

4:25 PM (NZT)
It has been a positive week for news in the Australian economy. The economic data has been stronger than expected across the board with the trade balance, building approval numbers and retail sales data all performing well. The main focus for the week was the RBA monetary policy announcement on Tuesday. The unchanged cash rate was widely expected and the "wait and see" approach towards further easing to the cash rate, certainly looked well placed as the positive data followed later in the week. Next week sees the monthly business and consumer confidence numbers provide a focus ahead of the all important employment market data on Thursday. 
New Zealand
It has been a relatively quiet week for economic news in New Zealand this week. Much of the focus came from the continued surge in dairy price at Fonterra's Global Dairy Trade (GDT) auction. Prices leapt another 14.2% on the trade weighted basis and hit record high levels since the auctions started 5 years ago. However, the positive sentiment for the NZD should be tempered by the falling volumes that transact as prices rise. Also of influence this week seems to have been another surge of re-insurance flows into NZD for  the Christchurch insurance pay outs. This kind of sporadic increase in demand for the NZD has become a feature over the last couple of years, and the timing on the flows is impossible to predict. Next week is again quiet for economic news in NZ, with the quarterly NZIER Business Confidence survey on Tuesday providing the dominant local focus.
United States
The recent softer tone of US economic data continued this week. Both important manufacturing and services numbers disappointed. Longer term interest rates reacted accordingly with their retracement from higher levels. This kind of softer patch for an economy is typical for a recovery, and should be anticipated after the trauma since 2008. Yesterday’s powerful easing policy will have flow on effects that stimulate most economies through pushes interest rates lower and the US will benefit from that over the medium term. The latest employment numbers come to light later today and will offer a intense final focus for the week.
It has been an interesting and mixed week for the outlook in Europe. In line with the global trend, the latest manufacturing numbers in Europe came out showing a larger contraction than expected. This was slightly offset by a rebound in the fortunes of the services sector. Unemployment and inflation measures were largely as expected. Peripheral member bond auctions (borrowing to fund debt) were reasonably well received, and this indicated that sentiment towards the ECB's monetary policy announcement had a skewed bias towards a lower cash rate. ECB head Draghi remains open minded on lower interest rates, but the move is reliant on continuing softness of European economic news. Demand for Euro's was volatile following the ECB statements, finally resulting in quite a scramble to buy EURO. Next week will see the Eurogroup (European finance ministers) meetings provide a focus.
United Kingdom
The UK economy has been somewhat on the sidelines this week, with larger issues at play in the wider market. Manufacturing and construction numbers were mildly disappointing, while overnight the services sector registered larger gains than expected. Also overnight was an unchanged monetary policy decision from the Bank of England (BOE), which added to the end of week (and much needed) positive sentiment for the GBP. The minutes from the previous meeting of the BOE monetary policy committee showing voter split moving towards more policy accommodation. Taking this into account would explain the relief rally from the GBP following the unchanged decision. Next week will see retail sales a housing numbers provide the focus along side further manufacturing data.
There has been no Canadian economic news so far this week. This changes later today with the latest employment, trade balance and manufacturing numbers due for release. Price action of the CAD against the likes of the Australian and New Zealand dollars remain within recent ranges, elevated in favour of the antipodeans and offering good value buying of CAD with both currencies. Next week will see the Bank of Canada's Business Outlook Survey and the monthly building permit data the domestic focus.
This week has been all about the new Bank of Japan (BOJ) leadership group and their first monetary policy announcement yesterday. Expectations were high and Governor Kuroda certainly delivered. The BOJ will double the size of their longer end government bond purchases. This is an effort to materially lower the borrowing costs for businesses, and increase pricing pressure to eliminate deflation, and push inflation back up towards the new 2% target within his two year horizon. They have front loaded a commitment to do anything they can to drive the deflationary pressure from the stagnant Japanese economy. The corresponding YEN depreciation has been significant and across the board, which of course is a widely expected consequence of such aggressive policy from the new leadership in both Government and the BOJ.
Topics: Economic news