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Central Bank’s hold Focus with BoJ, BoC and BoE

Australia

Chinese fourth quarter GDP came in on estimate at 6.0% and Industrial Production was significantly higher than the 5.9% expected at 6.9% assisting the Aussie Dollar late in the week into this morning’s trading. With Chinese imports of Iron Ore at close to record highs in December as well as local production up 12.0% at the same time in 2019 we could see a well buoyant AUD over the coming days/weeks. Also supported by the recent signing of the phase on trade deal between the US and China and talk of phase two underway we should see the AUD well supported for a while if risk sentiment allows. Data this week is limited to the Aussie Unemployment Rate and employment change.

New Zealand

Then New Zealand Consumer Price Index has been rising steadily over the past few years but not quite as fast as recent quarters. The index for the second quarter of 2019 was 1032 (plus 0.6%), rising to 1039 (plus 0.7%) for the third quarter a record quarterly high. The average quarterly rise from 1925 is 318.31 with the average over the past decade at 1018.29 according to statistics. The figures are based on a basket of products and services. Rental increases in various centres across New Zealand particularly over the past year have a big part to play. Fourth quarter CPI is due this Friday the only notable local data which is expected to come in with a 0.4% (1015) rise.

United States

Martin Luther King holiday Monday kicked off the week at snail’s pace. US Dollar value continues to grind higher with a steady flow of decent data. President Trump’s impeachment trial gets underway early this week which all seems a non event. With Trump’s republican majority in the senate there is no way he will be packing his bags. Currently the senate is made up of 53 Republicans, 45 Democrats and 2 Independents. Why the democrats pursued this is strange – he will be acquitted, and that will be that. US housing data published Friday in the form of new residential construction for the month of December showing a rise of 3.9% in new builds or 1,416,000 below the revised November reading of 1,474,000 but 5.8% above the December 2019 number of 1,339,000 a strong rise. These recent figures highlight a return to the mid 90’s housing strength. Federal Reserve’s Harker was on the wires saying the economy was tracking to reach the 2.0% target inflation and achieving economic growth of 2.0% in 2020.

Europe

The European Central Bank met Friday and discussed concerns over negative interest rates to Eurozone households. There has been some optimism since they met back in October 2019 but global bond yields have remained below expectations since mid 2019. The Euro continues to taper off in 2020 versus the US Dollar and the Aussie Dollar. This week we have German Producer Prices and ECB’s Lagarde speech as the main events along with the ECB rate meeting.

United Kingdom

The GBP was the strongest performing main board currency over the past week- up 0.60% against the Australian Dollar. Retails Sales for the three months to December 2019 printed Friday came in lower than we were expecting at -0.6% after 0.5% was predicted. Since these numbers represent Christmas sales it really is a terrible number. Chances are they will cut rates at the next Bank of England meeting on 31st January. This week on the economic calendar we have UK Average Earnings Index numbers with expectations of an annualised three month moving average of 3.1% rise which should fall in line with recent figures representing reasonably consistent labour pay increases.

Japan

The Bank of Japan meet this week to discuss Monetary Policy and Interest Rates. Bank of Japan’s governor Kuroda spoke last week highlighting his positive outlook for the Japanese economy for 2020. However, he said he would not hesitate to ease monetary measures if required. “Japan’s economy is likely to continue on a moderate expanding trend” he said. The Japanese Yen continues to be sold off in 2020 against the big dollar to 110.00- early May 2019 levels as positive US economic data continues to weigh heavy. We will watch any outcome on currencies when Kuroda speaks this week as he often drops hints about future policy and rate changes.

Canada

The Bank of Canada announced their Monetary Policy Report this week and Cash Rate Statement on Thursday with expectations that they will leave the cash rate unchanged at 1.75% for a while. Recent employment data surprised to the upside after dire readings in October and November reflected just how on edge the economic situation is especially with annualised growth is barely at 1.0%. Unemployment showed an improvement dropping to 5.6% which has a fair impact on any decision not to drop the cash rate sooner rather than later along with rising housing markets. Remember the Canadian economy is still the only developed country trading with a inverted yield curve.

Major Announcements last week:

  • Martin Luther King Holiday makes for thin markets Monday
  • UK House Prices lifted from 2.3% in January to be 2.7% y/y
  • UK Retail Sales prints at -0.6% for December from 0.5% expected
  • Chinese Industrial Production lifts to 6.9% from 5.9% expected
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