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· US Fed discusses further Quantitative Easing reiterating widespread USD weakness
· NZ GDP disappoints
· Euro zone Government debt issues remain
Market Overview:The main theme that dominated the market last week was US dollar weakness. The market kicked off for the week when the US Federal Reserve (Fed) released their statement indicating they would provide further monetary stimulus if needed. This is essentially the printing of money, and certainly negative for the USD.
The positive side of this action is it pushes stock markets higher and the growth currencies along with it. Friday saw some more positive data released in the US. This added further strength to the stock markets. On balance this meant last week was a positive one for growth assets.
The Australian economy continues to rumble along on the back of Asian demand for its resources. The AUD rallied strongly as Reserve Bank of Australia (RBA) looks set to raise interest rates in October. The New Zealand economy confirmed its spluttering growth profile with a much worse than expected GDP number disappointing the market. This stemmed the rise of the NZD against most currencies.
The extent of the USD decline, now seems to be dictated by the relative weakness of the economic data from the worlds other large economies. In the UK, we saw higher levels of Government borrowings, again weakening housing numbers, and some calling for US style stimulus.
From the Eurozone, the ever present Government debt issues again surfaced. On Friday Ireland was under the spotlight as its borrowing costs ballooned to the highest levels on record, after looking steady earlier in the week. This type of volatility is indicative of very fragile market conditions. Meanwhile manufacturing numbers across the board were weaker, and looks to be a result of the strengthening EUR.