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Economies of note : 22 Nov 2013

Written by Sam Coxhead on November 22nd, 2013.      0 comments

There has been limited domestic economic data to provide the lead in the Australian economy this week. However, there has been plenty of noise for the Australian dollar provided by external factors. The US Federal Reserve monetary policy meeting minutes seem to have convinced some that there are increased odds of QE tapering in the coming months. This has undermined demand for the AUD to a certain extent, as it is a beneficiary from the stimulatory strategies. Adding to the downside momentum has been the IMF announcement that it sees the Australian dollar as being overvalued by 10%, and some disappointing numbers from Australia’s largest trading partner, China. In a speech last night, RBA Governor Steven’s further increased the pressure on the AUD. He stated that while the bank was unconvinced about the effectiveness of trying to drive down the exchange rate, he remains “open minded” on currency intervention.  Next week sees a limited amount of top tier economic news due for release in Australia. Of note will be the latest private capital expenditure numbers on Thursday.
New Zealand
There has been very little in the way on economic news in New Zealand this week. The latest Global Dairy Trade auction results saw the pricing stablise after the weakness seen since the peak a couple of months ago. The demand for the New Zealand dollar has been undermined this week as the market increased the odds of QE tapering from the Federal Reserve in the coming months. Adding to the softer tone were yesterday’s disappointing Chinese manufacturing numbers. Next week the lead will again come from external factors for the most part, with just the trade balance and the latest ANZ business confidence numbers of offer focus.
United States
The focus in the US (and for the rest of the world), continues to come from the Federal Reserve and their apparent approach the the tapering of their quantitative easing program. Wednesday this week saw the release of the previous monetary policy meeting minutes. These have been construed as leaning towards earlier tapering by the market. The reaction has been curious given there was not too much to shed new light. The price action further confirms the edgy nature of market sentiment as we approach 2014. This potential tapering will continue to set the scene in the coming months, and periods of increased volatility can be expected. The economic data, and in particular the employment numbers remain the key. Positive retail sales numbers from Wednesday were joined overnight by mixed results from various manufacturing data series, which further added to the volatility. As the prospect of Fed tapering approaches, in theory the US dollar should see further support as movement higher in the long end interest rates will increase USD demand. Next week will see housing numbers, consumer confidence and durable good sales numbers provide the lead.
It has certainly been a very interesting few weeks for Europe. Confirmation has come that the ECB will consider further stimulatory means such as negative deposit rates as the economy flounders. Ironically, the powerhouse German economy continues to display robust statistics whilst the hapless southern members remain under pressure. Manufacturing numbers last night were as expected,however the services number disappointed. In a speech from ECB President Draghi, he discounted the chances of negative deposit rates in the short term, but leaves them as an option. Now focus turns to tonights consumer confidence number and another speech from ECB President Draghi. Next week looms large for Europe with the important inflation and employment numbers offering the primary focus. It seems like the ECB will remain the primary lead source for the Euro in the coming months and into what will likely be a very interesting environment in 2014.
United Kingdom
It has been a relatively quiet week for news in the UK economy. Of primary focus has been the release of the BOE’s minutes from their monetary policy meeting two weeks ago. There was little of new insight within the minutes. Current policy settings remain well placed to further foster the recovery, and all nine votes going for unchanged monetary policy. Overnight saw comments from the BOE head economist Dale on the wires. He re-iterates that interest rates will remain low for an extended period and it will be a number of years before the UK economy gets back to “normal”. Next week sees a busy economic calendar, with further housing, GDP, consumer confidence and money supply numbers to provide the lead. The preliminary Q3 GDP numbers on Wednesday will offer the primary focus. Given the buoyant numbers in the UK of late, it can be expected that further good news will come from this important release.
The main focus for the Japanese economy this week has been yesterday’s unchanged monetary policy decision from the Bank of Japan (BOJ). Whilst leaving monetary policy unchanged Governor Kuroda was more upbeat about the global economy that in his previous statement. With a heavily export reliant economy, this is encouraging, with the most positive signs they see coming from developments in the US, and a lesser extent China. Next week is an important one for the Japanese economy. BOJ monetary policy meeting minutes come ahead of the important monthly inflation numbers, along with retail trade and industrial production data. The BOJ’s massive monetary stimulus programme initiated this year has the sole target of boosting the annual inflation rate to 2.0%, so next Fridays inflation numbers offer the primary focus in the short term.
It has been a quiet week for Canadian economic news this week so far. Just wholesale sales numbers have offered any real focus, and these were a little under expectation upon release. Later on today we see a flurry of important news in the form of the latest inflation and retail sales numbers. With rolling year on year inflation data expected to come in at 1.2%, those numbers should be of limited impact. Retail sales growth of 0.3% for the month is expected, and arguably this will be of more significant impact. This week’s resurgence of the US dollar has aided the CAD, particularly  against its Australasian counterparts. Next week will see the Q3 GDP numbers offer the primary focus when they are released on Friday.