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Economies of Note - 29th January

Written by Ian Dobbs on January 29th, 2016.      0 comments

1:30pm(NZT)
Australia
It has been a relatively quiet week for the AUD which was dominated by Wednesday’s Q4 inflation release. The number topped the market consensus as the quarterly and annual numbers beat expectations by one tenth of a percentage point. Export price data released yesterday failed to ignite interest despite printing on the underside of expectations. Reaction to the U.S. FOMC statement yesterday was relatively muted, although the AUD is ending the week on a firmer footing today. The demand comes after adjustments to the wording of the Fed statement signalled they are taking a more cautionary stance to monetary policy tightening in light of recent softer U.S. data flow and the increased global economic uncertainty. Local focus for the AUD now turns to private sector credit and producer price data this afternoon. Next week’s calendar is dominated by the RBA meeting on Tuesday (rates to remain on hold at 2.0%) and retail sales data on Friday.
 
 
New Zealand
The story of the week for the NZD was always going to be about yesterday’s RBNZ cash rate meeting, which didn’t disappoint. Despite leaving rates on hold at 2.5% (as widely expected) the RBNZ surprised many market participants by opening the door for further rate cuts after Governor Wheeler acknowledged the pressure that falling oil prices and weaker global growth were having on the inflation outlook. In his statement Wheeler noted that inflation “will now take longer to reach the bank’s 1-3% target than previously expected”, comments whose theme echoed those of other global central bank leaders recently. Yesterday’s announcement comes hot on the heels of last week’s soft local Q4 inflation print which saw the inflation rate decline to 0.1%, the weakest since 1999. A narrowing (marginally better than expected) trade balance for December released soon after the RBNZ meeting failed to make any impact. In focus this afternoon will be the ANZ Business confidence release, next week sees the release of local Q4 employment data and the next auction in the GDT dairy trade series.
 
 
United States
The USD has drifted lower this week on the back of key data misses and the FOMC statement yesterday which struck a more dovish tone than that issued at the December meeting. Market expectations that the Fed was unlikely to hike another four times in 2016 took a further boost yesterday after changes in the wording of the statement from December. These changes alluded to more caution within the board over the likely tightening path going forward. The data calendar was dominated by the large miss in durable goods orders data overnight. December pending home sales data also released overnight posted only a moderate rise, much less than the 0.8% expectations. New home sales data released yesterday beat expectations, although the earlier releases of the Dallas and Richmond Fed’s manufacturing indices fell short of the market consensus. The CB Consumer Confidence series posted a rise from the month prior ,although the Services PMI January number was seen declining from the December print. The Q4 GDP print dominates the calendar tonight although notes from yesterday’s FOMC statement will have had the market pairing tonight’s expectation in light of the Fed’s comment that growth had slowed late last year. Next week is punctuated by manufacturing and ISM non-manufacturing data, before the all important January Non-farm payrolls employment report on Friday.


United Kingdom
The GBP has overcome early weakness to be trading marginally higher on the week in trade presently. The data calendar was dominated by the overnight U.K. Q4 GDP data release which printed in line with the consensus forecast. Earlier in the week saw the release of the CBI industrial trend total orders data, this slipped further in January whilst the Nationwide house price index rose less than expectations. A speech by the BOE Governor Carney continued to downplay the prospects for BOE a rate hike. Next week’s data wrap includes U.K. manufacturing and construction PMI data before the BOE interest rate meeting on Friday. U.S. employment data later in the day will be of particular interest also, especially after yesterday’s FOMC statement which struck more cautionary notes, this had the market continuing to discount the number of Fed rate hikes for 2016.
 
 
Europe
The EUR has ground out modest gains this week mainly on the back of losses by the USD after key U.S. data misses and a Fed FOMC statement which struck a more reserved tone than in December after it noted a moderation in U.S. growth and concerns over the global picture. Local data included a miss in the German IFO business sentiment data and low impact regional consumer confidence data which held up better than expectations. German inflation data released overnight marginally beat forecasts but was still negative for the month, euro-zone data included declines in the manufacturing and economic confidence numbers. The data wrap tonight includes amongst others the euro-zone inflation reading for January, next week’s schedule includes regional manufacturing/services PMI numbers and employment data.
 
 
Japan
Trade in the JPY was to be expected quiet in the lead-up to this afternoon’s BOJ meeting press conference and local data releases. The latest Bloomberg survey has only 6 of the 40 surveyed forecasting further easing. The market will closely watch for comments around the BOJ’s inflation expectations. Also in focus will be talk on the labour market for signs from the central bank that further easing is likely to be warranted. Data releases this afternoon are numerous, although so far this week only December retail sales, which failed to meet the market’s expectations, has been of any note. Reaction to yesterday’s FOMC statement was relatively muted despite the Fed striking a more cautionary tone. Next week’s calendar is quiet, manufacturing PMI  and household confidence data feature but will take a back seat to the emerging U.S. data flow and general risk sentiment/Yen safe haven flow.
 
 
Canada
CAD sentiment has once again been strongly influenced by oil pricing volatility this week, and especially so in light of the lack of data flow so far. Oil prices quickly overcame their early week Iraq supply related news flow lows to reach levels not seen in over three weeks overnight. This came on the back of headlines from the Russian Energy minister which said that Saudi Arabia had floated cooperating to cut production by as much as 5% in an effort to reduce the excessive supply glut (headlines which were later refuted by OPEC representatives). Oil news flow will continue to be the dominant driving force for the resurgent CAD next week. The CAD has benefitted from this week’s strong oil price rebound which took pricing to near 13 year lows last week. Data of interest includes tonight’s local GDP report and the RBC manufacturing PMI release next week.
 
 

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