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Economies of note this week: 20th April

Written by Sam Coxhead on April 20th, 2012.      0 comments

4:25 PM (NZT)
The Australian Economy:
The focus for this week in the Australian economy has undoubtedly been the Reserve Bank of Australia (RBA) monetary policy meeting minutes. The minutes confirmed that the RBA are ready to cut the cash rate to 4.00% at the next meeting on May 1st. The one tempering factor being the inflation number due next Tuesday. If for some reason this was higher than expected, a reassessment maybe made on their decision. Somewhat ironically the IMF have issued their latest updates and they still position the Australian economy as having the strongest growth in the developed world. Commodities remain off their peaks for the Australian exporters, and this should be another factor the RBA consider.
 
The US Economy:
Retail sales numbers in the US on Monday were a healthy +.8% vs an expectation of +.6%. The NYK FED manufacturing numbers were a little disappointing however, which is a clear example of what is a struggle towards widespread economic growth in the US. US interest rates have again pushed lower at various times this week. The move lower is directly attributable to the increased anxiety in the European debt markets. Yesterday saw the important  Philadelphia FED manufacturing numbers released and come below expectations. Next week the focus returns to the FED and their monetary policy decision on Thursday. The accompanying statement will be of most importance with no change expected to interest rates or quantitative easing. Advanced GDP numbers for the first quarter on Friday will round out an important week in the US.
 
The UK Economy:
In the UK this week the inflation numbers came out on Monday and proved to be as high as expectations, at 3.5%. Inflation also proved to be the interesting point of discussion when the Bank of England(BOE) monetary policy meeting minutes were released on Thursday. For the time being further quantitative easing (QE) is off the agenda, with the vote split pushing to 8-1 from 7-2 in favour of not increasing QE. Comments from  BOE’s Tucker stating that inflation risked getting uncontrollably high, highlights the concerns within the central bank and led further to demand for GBP. Retail Sales numbers later today will also be closely watched. Next Tuesday’s preliminary GDP numbers will be the domestic highlight of next week for the UK economy.
 
The New Zealand Economy:
The NZ Prime Minster is on a meet and greet tour and Asia and took it upon himself to talk about the high level of the NZ dollar. In what can be best described as lip service , PM Key stated the Government was considering ways to resist currency appreciation.  It has a small effect of softening the NZD in what was a quiet start to this week. The monthly Fonterra online diary auction results were very soft, down 10% on the previous month on average. As we headed into the inflation numbers yesterday, this added to lower demand for NZ dollars as the currency tracked lower across the board. The inflation numbers confirmed the relatively benign environment coming in at just +.5% for the 1st quarter against a market expectation of +.6%. The RBNZ will likely remain on the sidelines until the end of the year at least, on the back of a lowering inflationary outlook. Certainly the high level of the NZD has shielded the NZ economy from the inflationary pressure starting to show up elsewhere. The RBNZ do have a monetary policy announcement that will certainly be unchanged next Thursday, but as usual their comments will be closely watched.
 
The Canadian Economy:
The Bank of Canada (BOC) has been the focus so far this week for the Canadian economy. A relatively upbeat assessment of the domestic (or North American) outlook led to good demand for the CAD. BOC head Carney stated that the cash rate would have to rise appropriately from its record lows as the economy improved, albeit rises gradual. Inflation numbers later today round out the week and will offer insight to the potential timing of the start of cash rate hikes by the BOC. A higher number than the expected +.3% for the month would further lead to CAD demand. Next week has just retail sales on Tuesday for a domestic focus in Canada.
 
The Japanese Economy:
The Japanese YEN has seen renewed periods of weakness this week following remarks from BOJ officials that further stimulus will be offered if required. Increasing of quantitative easing (QE) will always undermine demand for a currency, so it is a useful tool to be able to pay lip service to for officials. Friday next week will be the BOJ’s opportunity to loosen monetary policy at the monetary policy meeting. Expect the YEN to remain heavy as the meeting approaches, even if global equity markets remain weak(which would normally strengthen the YEN).
 
The European Economy:
Increased concerns continue in Europe around the ability of peripheral member states to funds themselves on an ongoing basis. Again the future of the single currency is being called into account, and a breakup of the Euro-zone remains a possible outcome if the pressures continue over the medium term. Interesting the political pressures are really starting to build, both domestically with various elections, but also internationally. The IMF are placing more pressure on the European Central Bank to ease monetary conditions, much to the ire of the inflation fearing Germans. Manufacturing numbers are on the agenda next week, and these will provide focus along side the debt markets.
 
 

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