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Economies of note this week :

Written by Sam Coxhead on March 1st, 2013.      0 comments

4:31 PM (NZT)
Australia
This week has seen a couple of very interesting sessions for the Australian dollar market.  In the absence of local focus early in the week, the market was primarily driven by the wider market. Of particular note was today’s data focus in the form of the Australian private capital expenditure. The headline number was weak at -1.2% vs +1.1% expected for the quarter. However the detail looking forward was more encouraging. Estimations for 2013 came in at 252.5 billion and this was ahead of where the market had anticipated. Subsequent to this release Westpac pushed out their expectations for an easing to the cash rate from March to June. Next week is a very busy one for the Australian economy. The latest building approval, retail sales, GDP and trade balance numbers will all be watched closely. Joining the fun will be the RBA with what should be an unchanged monetary policy announcement on Tuesday. The statement will offer further insight to their thinking on the outlook going forward.
 
New Zealand
This week saw Fonterra announce their expected farmer pay out steady at 5.50NZD per/KG. Whilst this was welcomed the increasing unease at the North Island drought conditions is causing concern in NZ’s largest export sector. Rain is desperately needed and this will be of increasing focus in the coming weeks. Of surprise was a material jump in the ANZ Business Confidence Survey. Result’s leapt from 22.7 to 39.4 and is at the highest level since July 2011. Overnight saw the crediting rating agency S&P issue a warning about the NZ banking sectors exposure to the property market. With uncertainty in the short-medium term global growth profile, a rapid fall in the NZD could see a corresponding correction in house values as interest rates would climb as a result. This seems an unlikely scenario in the current environment. Next week is again quiet for economic news, so the lead will come from the wider market risk appetite for the most part.
 
United States
The news has been a little mixed in the US this week. Better than expected consumer sentiment and housing numbers have been countered by softer durable goods sales and 4th quarter GDP numbers. The GDP numbers are not as weak as the headline suggests at +.1% vs +.5% expected, but definitely highlight’s the on going vulnerability within the recovery. The semi-annual senate testimony from FED chair Bernanke held little of surprise. The FED remains committed to the quantitative easing program until the labour market strengthens. Later on today will see the release of the latest US manufacturing numbers and a further statement from FED chairman Bernanke. Next week sees the latest numbers on the trade balance and the labour market. These releases are also joined by the results from the latest US banking sector stress tests, which will be closely monitored.
 
Europe
As expected the Italian elections proved to be full of drama in what was an inconclusive result. Negotiations are on going and it remains unclear whether or not a return to the polls will have to be made at this stage.  European interest rate markets reacted accordingly to the Italian situation, moving peripheral yields higher whilst the core of Germany and France moved lower. The EURO reacted accordingly with a move lower across the board. Subsequently, markets have stabilised and the EURO regained some of its lost ground. Inflation numbers remain contained and with lower growth expectations for 2013, the focus on next week’s ECB monetary policy meeting intensifies. It seems unlikely that a cut to interest rates will be given, but even talk of that will stir the market. Retail sales and services numbers will also garner attention, but should be of limited attention given the large issues currently at play.
 
United Kingdom
The UK economy has been off the radar for the most part this week. The BOE inflation report hearings reveal the BOE remain poised to increase stimulus if the economy remains under pressure. This stance is of no surprise, but does increase the focus on next week’s BOE monetary policy announcement. Revised 4th quarter GDP numbers passed without reaction as the number came in at -.3% as expected. Alongside the monetary policy decision on Thursday next week, we have construction and services numbers earlier in the week to provide attention.  
 
Canada
It has been a very quiet week for economic news in Canada so far. Outgoing BOC Governor Carney stated in a speech that recent soft economic data would see a downward revision of growth expectations for 2013 from the BOC, and expectations for a move in monetary policy have corrected accordingly with no change to the cash rate expected in the coming months at least. Next week sees a busier economic calendar. The BOC will announce unchanged monetary policy on Tuesday, but their statement will be closely watched. This is followed by manufacturing numbers. Thursday sees trade balance and construction data released and Friday caps off the week with the latest labour market release, which will be keenly anticipated.
 
Japan
It has been a relatively quiet week so far for the Japanese economy. PM Shinzo Abe has made his nominations for the BOJ leadership and these now just have to be ratified. Retail sales numbers beat the markets expectations, albeit they still confirm a 1.1% drop in activity. However, the latest industrial production numbers were lower than expected . Today’s inflation number revealed deflation as expected at -.6%, and to my mind justifies the Japanese policies currently being touted.. Next week will see the BOJ monetary policy announcement provide the primary focus on Thursday. Current account and the final revision of GDP numbers on Friday will also be closely watched. The YEN weakness has halted this week as the wider market risk aversion saw demand build. It seems likely that further weakness is not guaranteed in the short term, as many pairs look to consolidate around the current levels.
 

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