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Economies of Note - 25th November

Written by Ian Dobbs on November 25th, 2016.      0 comments

2:45pm(NZT)
Australia
Firm commodity prices have helped the Australian dollar buck the trend of a stronger US dollar in trade this week. Among the strongest commodity performers has been copper which is on track for its best monthly gain in over a decade (over 20%). Iron ore prices also remain well supported. Local data releases included Q3 construction work done which fell by more than expectations. The fall followed a decline in the quarter prior and was the fastest pace of decline since Q3 2000 as output fell across all categories, notably non-residential and building. Year-on year construction output has fallen by 11.1%. ANZ/Roy Morgan Weekly consumer confidence fell in the latest week to 115.5 (from 118.2), although the low ranking data this week has had no real influence on trade. Releases next week include indicators on new home sales, building and private house approvals and housing/private sector credit data. These releases will be followed by data on capital expenditure and retail sales.
 

New Zealand
It has been a quiet week in NZ which has seen the kiwi continue to be placed under pressure via further strong gains in the greenback. Data received over the week started with Q3 retail sales on Monday which rose by 0.9% on a seasonally adjusted basis.  The number was well down on the quarter prior, core sales were also well down and easily missed expectations. Migration data reached a new record in the year ended October of over a 70k net gain in migrants. Trade data released this morning for October showed a deficit of 104 million less than that expected for the month on the back of improving export numbers. Interest next week starts on Wednesday with building consents and ANZ business confidence.
 

United States
The recent trend of US dollar strength has continued again in trade this week. Data has again been strong overall. Existing home sales rose to highs not seen since 2007. The 2% lift in October easily beat expectations, although the fall in mortgage applications should temper future expectations. Durable goods orders which easily beat expectations added to evidence of accelerating growth in the fourth quarter. Other data included the manufacturing PMI and Michigan consumer sentiment which both also beat their respective consensus estimates, although new homes sales fell against expectations of a small rise. The Fed minutes backed the consensus view that the Fed will move rates higher in December and judged that near-term risks to the economic outlook were roughly balanced. Odds for a further hike by the middle of next year have continued to lift in recent days. Second tier PMI indicators will be expected to have little impact on trade when they are released later today. This will turn focus to next week which starts with GDP numbers on Tuesday.
 
 
United Kingdom
It has been a relatively subdued week of trade for the sterling which saw much of its volatility occur at the start of the week after positive comments from PM Theresa May on the desire for business friendly arrangements in the Brexit negotiations. UK Government forecasts of larger than expected borrowing in the wake of the UK EU exit vote had little influence on trade. Data released so far this week has included CBI industrial trend order numbers which rose from eight month lows. The -3 reading was the strongest since June which beat forecasts and reflected higher expectations for output growth in the next three months. Consumer credit expanded at the fastest rate in nearly 10 years last month and mortgage approvals were seen reaching five-month highs. Focus today will be on Q3 GDP numbers and business investment data for the same period.


Europe
Demand for the US dollar has continued to overwhelm the Euro in trade this week. Data of note started on Wednesday with PMIs which rose and beat expectations in the eurozone across the entire composite, manufacturing and services series. The French reads also beat expectations, although the German manufacturing and composite reads marginally disappointed. The German IFO came in unchanged and on expectations. Final data for the German Q3 GDP showed growth of 0.2%, half that of the quarter prior. ECB VP Constancio said the ECB would keep its expansionary stance on monetary policy. The financial stability review noted increased political risk and the concerns over euro area banking sector long term profitability. The impact on trade channels and the spill-over effect of changing inflation/interest rate expectations in the US post the Trump election win were also areas of potential concern. The bank reiterated that it doesn’t target the exchange rate, a statement which implies a lack of concern over the Euro’s recent falls.
 
 
Japan
The influence of the surging US dollar has continued to pressure the Yen lower in trade this week. Losses against the greenback have now totalled over 12% since the US Election Day highs. Data released this week included underwhelming trade numbers which were heavily influenced by falling exports. Flash manufacturing PMI data eased on the month prior and failed to reach expectations. The decline was driven by a reduction of growth in new orders although levels remained in expansion territory for the third straight month. Inflation data released today came in on expectations at -0.4% year-on-year at the core level. Looking ahead to next week we receive data on household spending, industrial production and employment amongst other releases.


Canada
The Canadian dollar firmed to reach near-two week highs against the US dollar this week as investors eye the prospect of an output cut by major oil producers at the end of the month and as domestic retail sales posted its best monthly gain since April. The data matched economist forecasts, although the release would have been flat without the inclusion of increased purchases of cars and parts. Wholesales sales released the day prior were disappointing but had no effect on trade. Looking out to next week we have local current account, GDP and employment data to consider although expect most of the volatility to derive from the outcome of the OPEC meeting which is scheduled to conclude towards the end of the week.
 
 

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