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Australia
Westpac Australian Consumer Confidence rose 2.3% m/m which is an encouraging sign given recent bushfires and Coronavirus scares. Governor Lowe said the Coronavirus is having an uncertain impact on the economy but major impact on tourism sectors. The recent Chinese policy stimulus package will help the Australian economy especially with the Iron ore price recovering off recent lows. This week’s monetary policy minutes from the RBA’s 4th Feb statement is in focus along with Wage data Wednesday and Unemployment figures Thursday.
New Zealand
The RBNZ left the cash rate unchanged at 1.0% as widely predicted but changed their policy stance from an easing bias to a neutral tone sending the kiwi into a flurry. Employment remains above sustainable levels and economic growth is expected to accelerate over the second half of 2020. No further rate cuts are forecast for 2020 with inflation at close to the 2.0% midpoint target. Coronavirus (COVID-19) ongoing risks could pose downside volatility to the New Zealand Dollar if more new cases are reported. This week’s calendar cupboard is bare with no significant local economic data releasing.
United States
A US holiday Monday in observance of “Presidents Day” kept markets low key to start the week with trading volumes low. US Retail Sales came in Friday at the predicted 0.3% for January and Consumer Sentiment for February released slightly higher than expected even with ongoing coronavirus fears. It was a mixed week for the US Dollar within what was mostly a ‘risk off” market. The US Dollar climbed higher over all major currencies except for the safe haven Japanese Yen. Attention reverts to the latter half of the week with Building Permits and monthly Producer figures for January. Fed Minutes from the Jan 30th policy meeting also comes into view and could add volatility Thursday.
United Kingdom
Bank of England Governor Carney spoke late last week saying stimulus may be required to recover the economy back towards target growth. Interest would remain low for some time with any adjustments to be modest. UK Chancellor Sajid Resigned after a disagreement with Boris Johnson and has been replaced by Rishi Sunak. This caused the GBP to hold onto gains against most crosses last week as the change should create more infrastructure spending letting the Bank of England off the need to instigate more monetary stimulus. The change should also provide a better negotiating table with the EU post Brexit.
Europe
The Euro has been the weakest currency over the past week with data not coming in too positive. German GDP for the last quarter 2019 slumped to 0.0% from the 0.1% growth forecast stagnating after a positive third quarter. The sell off across the board in the Euro has seen the currency against the big dollar fall to an April 2017 low. The US has increased tariffs on European Built aircraft from 15% from 10% increasing pressures on Brussels in a long standing dispute over aircraft subsidies. The tariff will take effect on 18th March. US negotiators have said they remained open to further chats about a settlement. French and German Manufacturing figures print this week the focus, we expect further movement in the EUR.
Japan
Markets are continuing to monitor ongoing developments on the coronavirus front in Japan with the biggest concentration of affected people outside of China with a total of 414 affected and 1 death. Fourth quarter GDP published at -1.6% compared to -1.0% Monday, taking the Yen lower 20 points against the Dollar as the economy shrank the fastest in six years. A Sales tax hike and global demand affected global expenditure and consumption. It could go from bad to worse for the Japanese economy as first quarter figures are now being affected by coronavirus damaging tourism. Japan now sits on the edge of a recession.
Canada
At the Australia-Canada Economic Leadership Forum in Melbourne late last week Bank of Canada (BoC) Poloz commented “The Canadian Economy is in a pretty good place. Without stimulus around Fiscal policy would have almost certainly seen rates track lower” he said. With coronavirus taking a toll of markets, competition for oil suppliers has ramped up. Chinese Oil demand has dropped to over 3M barrels a day or a drop of 30.0%. The massive 2020 decline in the Canadian Dollar is partly due to the struggling Crude price which has fallen from around 62.00 per barrel to 52.00 per barrel. Forecasters have predicted the price to be well supported throughout 2020 but only after coronavirus has been contained can we start to see any recovery. This week on the calendar is CPI for January and Retail Sales for December.
Major Announcements
- NZ Keep cash rate unchanged at 1.0%
- German quarterly GDP falls to 0.0%
- US Retail Sales comes in at 0.3% as predicted
- Japanese GDP y/y narrowed by 6.3% in the fourth quarter
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