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Whats happening in economies of interest around the globe this week?

Written by Sam Coxhead on October 13th, 2011.      0 comments

6:00 PM (NZT)
Of note:
The USD and JPY, the usual safe haven currencies have underperformed this week, leading to gains in others across the board. There are a few factors that have likely contributed to this;
  1. Addition longer term funding provided by the ECB to banks at the ECB monetary policy announcement
  2. Better than expected US employment numbers
  3. The Franco-German announcement in the weekend of comprehensive plan to address Euro-zone debt issues (to be announced in early Nov)
  4. A significant accumulation of “bought USD” positions because of the recent risk aversion, being exited in a small period of time.
  5. The Peoples Bank of China have been active in both the Shanghai stock markets and the Yuan spot market. They have been actively buying Chinese banks shares that have been recently under intense pressure., and selling Yuan at the daily .5% limit margin.
The Australian Economy:
In Australia business and consumer confidence have seen conflicting reports with business confidence rebounding from low levels, while consumer confidence has dropped again after rebounding last month. Home loans data came out fairly much as expected and the just released Employment numbers show the unemployment rate from last month revised down from 5.3% to 5.2% and the current month at 5.2% also. Those are far better reading than  two months at 5.3% , and the interest rate market has lowered expected cash rate cuts from three 25pt cuts expected to around 1.5 25pt cuts.
The New Zealand Economy:
The New Zealand economy has been reasonably light on economic data this week. Manufacturing activity numbers released by Business NZ show a decline in activity for the 4th straight month. The Food Price Index has also showed a welcome decline , driven by seasonal movements in fruit and vegetables. Anecdotal evidence from the Bay of Plenty points towards a quiet disaster occurring in the kiwifruit industry as the effects of the disease PSA really start to impact. Export of gold kiwifruit will be almost non-existent next year, and marketer Zespri is looking at substantial staffing layoffs. The very future of the industry as a whole is at stake in what looks to be a pivotal new two years.
The UK Economy:
The UK economy has continued its sluggish performance. Comments from Bank of England (BOE) indicate that the increased level of quantitative easing (QE) last week was in response to a further drop in activity in the economy in the 3rd quarter, and the possibility of this spilling over in the 4th. The labour market numbers were better than expected on the face of it with the monthly increase of 17.5k claiming unemployment benefits, was below the 25k expected. Unfortunately the unemployment rate rose to 8.1% against an expectation of 8.0%. These factors have added to the Pound Sterling’s underperformance this week.
The Canadian Economy:
News for the Canadian economy has been light this week. Housing starts were better than the expected 187k at 206k and from now the focus moves to the trade balance due out later on today.  
The European Economy:
The European economy remains delicately poised. The next tranche of bailout funds for Greece now looks to be a formality as positive comments from the EU/IMF/ECB troika investigators point towards the funds being sent. This is positive and along with the positive sentiment taken from the Franco-German comments last weekend. These were made with regards to a definitive aid plan for European banks in  order to stem further debt contagion from spreading, coming in early November.  Further positive , but expect news came from Slovakia overnight, that although they have not yet been able to pass the vote through parliament, they have an agreement to extend the European Financial Stability Fund (EFSF). They are the last remaining EU member to do so. None the less the current risks remain high and the market vulnerable to shocks in the coming weeks.
The Japanese Economy:
The news to emerge from Japan has been unconventional to say the least. Unwelcome news was released overnight that radiation at elevated levels has been recorded at Fukushima and parts of Tokyo. This coupled with persistent rumors that the Bank of Japan(BOJ) are looking at attempting to implement a Swiss National Bank (SNB) style floor on the USD/YEN rate, essentially a cap on the YEN level. This would see the YEN depreciate across the board in the short term, and has had a material impact in the last 24 hours.
The US Economy:
The US economy has seen a pick up in the economic data in the last two weeks. There are hopes that the 2nd half of 2011 will be better than the moribund performance in the first half. This positive sentiment saw strong buying of stocks on Monday which lifted all risk assets and was a surprise to many market participants. Since then the enthusiasm has tapered as the Foreign Currency Bill before the senate highlights the cross border political instability currently at play. This coupled with Slovakia’s inability to get a positive vote for the expansion of the European Financial Stability Fund, all so added to the resurgence of the US dollar. The economic data in the US started this week with this morning’s release of the last Federal Reserve monetary policy meeting minutes. These revealed the concerns that board members had about the clouded outlook for the economy. There was pressure from some members to increase the measures announced to help stimulate the sporadic return to growth.