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Economies of interest this week.

Written by Sam Coxhead on December 6th, 2012.      0 comments

4:32 PM (NZT)
It was been very busy week of economic news for the Australian economy, and focus is not yet complete. However, for all the potential for volatility, the price action has been remarkably contained. Retail sales and building approval numbers were lower than expected. The RBA reduced the cash rate to 3.00% , which was in line with market expectations for the most part. However, the RBA again reserve judgement on future policy moves until the picture becomes more clear in 2013. The market is pricing a chance of further policy accommodation in the coming months, but the signs are that further easing is no certainty. Today’s employment numbers revealed a fall in the cash rate to 5.2% (against an expectation of 5.5%) , with solid monthly jobs growth of 13.9k, albeit a small fall in full time jobs was countered by an 18k increase in part time work. The trade balance tomorrow rounds out the last notable piece of Australian economic data for 2012, and sees a return to the focus on the wider markets  to provide the lead on Australian dollar demand.
New Zealand
The new RBNZ Governor Wheeler, delivered a very well balanced monetary policy statement today. Following the announcement was  a lengthy press conference that shed further light to the current thinking inside the central bank. The level of the NZD remains of concern, but not at levels that would give the green light for any RBNZ intervention. Current forecasts see the cash rate remaining unchanged at 2.50% into 2014, and the cash rate is unlikely to change until the inflation rate moves back towards 2%. Some of the offshore market participants were positioned for more “dovish” remarks that indicated a bias towards further policy easing, but these were not forthcoming. The balanced statement has been followed a small scramble to cover “sold NZD” positions. Whether or not these NZD gains can be maintained is yet to be seen. Uncertainty in the US remains in place as fiscal negotiations have been largely successful so far.  The notable remaining data for 2012 comes in the form of the belated Q3 GDP number on the 20th  Dec. Ahead of that, expect the wider market sentiment to provide the lead, once the “short covering” following today’s announcement has played out.
The United States
The negotiations over the fiscal cliff the US remain difficult. Little progress has been reported, and its seems likely that some kind of muddling solution will be found at the 11th hour. This result would be a temporary band aid at best. Focus will then turn to the consequent “debt ceiling” negotiations to come in early 2013. This week’s economic data has been mixed so far. Services data has outperformed, but manufacturing were uninspiring. The monthly employment number on Friday provide the remaining focus for the week. Next week sees the FED  make their monetary policy announcement on Wednesday, the release of retail sales numbers Thursday, and inflation data Friday. The fiscal negotiations will remain the primary driver of sentiment in the short term.
The United Kingdom
Economic news in the UK remains mixed at best this week. Manufacturing numbers were more perky than expected, but these were balanced by softer than expected services and construction data. Later on today we will see the Bank of England announce what will likely be an unchanged monetary policy decision. The Great British Pound has performed moderately well on the week, and has been supported by the buoyant nature of demand for EURO’s. Next week sees the release of the monthly employment numbers on Tuesday as the focus.
It has been an interesting week in Europe. The EURO has certainly benefitted from positive sentiment for the most part. Interestingly, the stock exchanges in Germany and France hit 52 week highs. The uncertainty is still centred around Spain for the most part, now that Greece has been sorted out in the short term. Spanish finance officials hinted that Spain will likely miss its deficit targets for 2012 and this pushed yields higher that pulled the EURO from its highs. European retail sales numbers disappointed for October, and this data added little to sentiment.  The European Central Bank meet to announce their monetary announcement later on today, although no change is expected at this meeting. It seems likely that the cash rate will be lowered at some stage early in 2012. Next week sees the release of the complete manufacturing numbers and these will be closely followed.
The Bank of Canada maintained its recent message at its monetary policy announcement on Tuesday. It sees that “some modest withdrawal of stimulus will likely be required” at some stage. Later on today the latest building permit and manufacturing numbers come ahead of the employment numbers tomorrow. Next week sees Wednesday’s trade balance numbers as almost the sole focus.
Topics: Economic news