By Sam Coxhead of www.directfx.co.nz
The Australian Economy:
The focus for the week in Australia has been the much anticipated inflation numbers. The core inflation number or +.4% vs +.6% expected confirmed to the market that the Reserve Bank of Australia has room within its targets to cut the cash rate to 4.00% at next Tuesdays monetary policy meeting. Further cuts to the cash rate in the coming months cannot be discounted especially if the slowdown in Europe escalates, and further impacts the Asian manufacturing nations for which so much of Australia’s economic resilience has relied. Next week not only has the monetary policy decision and accompanying comments on Tuesday, but also the quarterly Monetary Policy Statement from the RBA on Friday. Therefore by the conclusion of next week the market should have a very update read on the RBA’s stance and read on the current environment.
The US Economy:
It has been an interesting week for the US economy so far. Further evidence of easing in the pace of the recovery is evident with slightly lower consumer confidence numbers, and sharply weaker durable goods sales data. However the Federal Reserves (FED) stance on monetary policy remains very similar to its March statement. Quantitative easing remains an available tool, but somewhat unlikely to be used. Growth expectations have been mildly increased for 2012, but tempered for 2013/14. The equity markets have been buoyed by good earnings results from Apple, Caterpillar and Boeing. Today’s advanced GDP are the final focus for the week, with a 2.6% number expected for the quarterly growth. Next week manufacturing and employment numbers become the focus, in what will be another interesting week.
The UK Economy:
The big news of the week in the UK has been the -.2% preliminary GDP number which places the UK back in technical recession. The numbers may be revised from the current levels at the final release, but it is unlikely a material increase will be seen. Interestingly consumer confidence has improved, which backs up the increase in retail sales numbers seen last week. Next week sees various manufacturing, services and construction numbers due for release, and will add further to the evolving picture of the UK economy.
The New Zealand Economy:
The sole focus for this week has been the Reserve Bank of New Zealand (RBNZ) monetary policy decision yesterday. Little in the way of excitement was expected, and little came with the short statement accompanying the unchanged 2.50% cash rate. The NZD demand was weak into announcement, but we contained within recent ranges. The market anticipated the RBNZ would take this prime opportunity to pay lip service to the stubbornly high level of the NZD. Governor Bollard did not disappoint, issuing what the market accurately considered an idle threat from the decision maker who steps down in September. Expect no change in the NZ cash rate until early 2013 if the current benign economic growth and pricing pressure persist.
The Canadian Economy:
Retail sales came out close to expectation at +.5% for the month and was the focus of the week. Next week the GDP numbers on Tuesday will be closely watched, as will the manufacturing survey on Friday. Any positive US dollar news will benefit the CAD performance by default. A further swing back higher in chances of QE in the coming months would benefit the CAD via the indirect impact of higher oil prices.
The Japanese Economy:
The Japanese economy has been off the radar for much of the week until the last 48 hours or so. Speculation increased about the Bank of Japan’s monetary policy meeting and how much further quantitative easing they would employ. The result was a further 10 trillion YEN worth stimulation and this saw the YEN come under immediate pressure as the 10 trillion was the upper end of expectations. There is little in the way of economic data in Japan next week.
The European Economy:
The economic data focus for this week has been primarily around manufacturing and sentiment indexes, both of which have come in at levels below expectation. The equity markets remain focused on the performance of European banking stocks, which have been under pressure for obvious reasons. Of particular note today has been the double notch downgrade of the Spain credit rating by S&P. This led to a quick drop in the EURO, and raises the prospect of further downgrades within the Euro-zone. On a positive note the Dutch political instability looks to be righting itself. The ECB are likely to hear increasing calls for a cut to the cash rate as the growth projections fall away in non-core Europe. This again highlights the dislocated economic pressure the ECB face within the Euro-zone and again calls into question the long term prognosis of the single currency.
Originally posted at www.directfx.co.nz