Get a free Quote

From CCY
please type the characters you see:
(spam filter)
spam control image

Apply now

Obligation free account and currency commentary btn_apply_for.gif
Browse By Topic

FX News

Most recent FX News:

Read more

Whats going on in economies of interest this week?

Written by Sam Coxhead on September 22nd, 2011.      0 comments

4:57 PM (NZT)
The New Zealand Economy:
Today’s release of the 2nd quarter NZ GDP number showed a weaker than expected .1% growth. The expectation was for .5% growth and such a weak number will definitely give the RBNZ more time to contemplate any rate hikes coming before the end of the year.  This was the one top tier piece of economic data for this week. Interestingly the NZ diary giant Fonterra has posted record payouts to dairy farmers. This looks to be a very good result considering the slowing economic growth globally and will be a positive for the economy. Next week sees the release of the latest building and business confidence numbers.
The US Economy:
The US economic data remains patchy at best. The focus for the week was the Federal Reserve’s monetary policy announcement this morning. As expected they have announce a lengthening of their US Government debt holdings. This will have the effect of lower long term interest rates and has the goal of supporting the property market. The also restated that they are likely to hold the cash rate unchanged at 0-.25 until sometime in 2013. What was unexpected was the downbeat comments with regards to the economy. Their assessments were far more negative than at previous announcements, and this highs the speed at the global outlook has changed. The US stock markets remain weak this week so far, and US Govt debt very well supported as the risk aversion has increased.
The Australian Economy:
The Australian economic outlook remains mixed. Anecdotal evidence points towards a softening of the resources sector, that has been so very strong in the last year.  The RBA monetary policy meeting minutes reveal again the staunch attitude from the RBA with regards to inflation. There is tension between the rhetoric from the RBA and the pricing in the interest rate markets. The  RBA maintaining their hard line and not flagging interest rate cuts, whilst the market has 150pts of easing to the cash rate priced over the next 12months. The AUD has been under pressure as risk aversion has escalated this week. There is little in the way of economic data next week in Australia, so expect general market sentiment to provide the lead. The Chinese HSBC PMI number was just released at 49.4 vs an expected 49.9 figure. Below 50 indicates contraction in the Chinese manufacturing sector. This number has pushed the AUD back towards the lows of the day.
The UK Economy:
The economic data remains very weak in the UK as the economy struggles for growth amid the austerity drive of lower government spending. The focus for the week was undoubtedly last night’s Bank of England monetary policy meeting minutes. Whilst the vote split was 8-1 in not increasing the amount of quantitative easing (QE) at that meeting, the tone of the comments definitely points toward further QE at some stage soon. In a similar vein to the FED tone, the economic assessment was largely more negative than expected. The GBP has continued to struggle in this backdrop. With further QE increasingly looking likely, the GBP should remain under pressure. Adding to the negative sentiment was news the IMF have downgraded the UK GDP forecast for 2011 to just 1.1%.
The Canadian Economy:
The Canadian economy is also struggling. Yesterday’s higher than expected inflation figures will not be enough to force the Bank of Canada to raise interest rates in the coming months. With the US economy in such bad shape, the BOC should remain on the sidelines and this had led to CAD weakness this week. The weaker commodity price picture is also not  helping the CAD sentiment. Retail sales figure due on Friday will be closely watched for further guide on the state of the consumer.
The European Economy:
The situation in Europe is intensifying. IMF growth downgrades for 2011 and 2012 were not a large surprise. Greece seem poised to placate the IMF/EU/ECB officials next week, which should see confirmation that the next tranche(8 billion EURO’s) will be released to Greece. This will give banks more time to get their balance sheets in order, so they are better placed to deal with a Greek default at some stage. The current pressure on banks, but most of all European banks is immense. Evidence of this was news that German giant Siemens withdrew over 4 billion EURO in deposits from European banks and placed them directly with the ECB in an unprecedented move. The important German economic sentiment numbers remain low, and the market has French and German manufacturing and services numbers to digest tonight. There appears to be little prospect of a return to EURO strength in the near term.