By Sam Coxhead from www.directfx.co.nz
The Australian Economy:
The big focus this week was the Reserve Bank of Australia’s monetary policy decision on Tuesday. In what was close 50/50 call according to market pricing, the decision was to leave the cash rate unchanged at 4.25%. The board decided they wanted to see the results of the next inflation numbers on the 28th April, before making a possible cut. One hazards a guess that next week’s employment numbers will also be closely watched by the RBA. It looks very likely a cut will come at the May meeting and there will be a chance of a further cut in June. Retail sales numbers earlier in the week came out bang on the low expectation of just a .2% rise. The volatile building consents number on Monday was not great reading at -7.8%, but this has a history of making striking inter month moves. Yesterday’s trade balance numbers showed a 480 million AUD deficit, against expectations of a one billion plus surplus. Current interest rate market pricing suggests we have around 75 pts of cuts to come over the next 12 months.
The US Economy:
In what is a relatively busy week for economic data in the US, the surprise so far has come from the FED ‘s monetary policy meeting minutes (FOMC minutes). It is now unlikely that we have any chance of further quantitative easing measures in the short term, as the FED’s wording again toned down rhetoric on the subject. The important manufacturing numbers on Monday beat expectations by a small margin and were in line with stronger readings in the UK and China recently. The focus now comes from the important employment numbers due for release late in the US on good Friday. The US dollar has seen across the board demand following the FOMC minutes.
The UK Economy:
A positive week so far. Manufacturing and construction numbers have demonstrably beaten economist’s forecasts. The Bank of England monetary policy announcement is made this evening. As the announcement will almost certainly be unchanged, there will be no accompanying statement and we will have to wait for the minutes to be released in two weeks time for further insight, into their current interest rate thinking. Next week the trade balance and producer price numbers will be closely followed.
The New Zealand Economy:
There has been little in the way of economic data released in New Zealand this week. The latest Govt deficit numbers were as expected with lower than pre-election forecasted tax revenues being partially offset by lower departmental spending. The latest report from the IMF paints the National Government as doing a prudent job of managing the country’s finances in somewhat difficult conditions. Expect the next budget to show little if any spending growth on the back of the lower tax revenue. The NZ commodity price index has continued its move lower, with weak dairy products being somewhat countered by record beef pricing. Next week sees the release of the NZ Institute of Economic Research’s latest quarterly Survey of Business Opinion. Expect this to be reasonably upbeat if the latest business surveys from the NBNZ are a good yardstick.
The Canadian Economy:
The Canadian economy has been off the radar so far this week. Apart from a speech from the Bank of Canada’s (BOC) Carney, there has been little in the way of news. Carney’s comments were expectedly measured, but certainly were more upbeat than most central bank assessments in current times. Employment and manufacturing numbers later today are the focus for the remainder of the week. The rebound in the oil price has also partially boosted CAD sentiment. Next week the BOC Business Outlook Survey and trade balance numbers will be the focus.
The Japanese Economy:
In Japan this week the economic picture has continued its patchy outlook. The “Tankan” manufacturing survey results were weaker than economists expectations, but the average earnings numbers pointed towards the first earnings increase in nine months. The YEN has seen strange price action overall. It saw high levels of demand early in the week and made good ground on most pairings. This was somewhat strange due to the fact that global stock markets were also in demand, when the YEN would normally be weakening if that was the case. We can put this down to the start of the financial year and do not expect this correlation to continue. Next week the Bank of Japan becomes the focus, and their monetary policy meeting on Tuesday.
The European Economy:
In Europe this week the unemployment rate for the Euro-zone reached a record high at 10.8%, up from 10.7%. Importantly manufacturing numbers made expectation, albeit a 47.7 number showing contraction for the sector. Retail sales numbers released overnight show a -.1% fall against an expectation of a +.1% gain. The European Central Bank (ECB) held monetary policy unchanged as expected overnight. Observations from ECB head Draghi point towards a brushing off of the short terms inflation risks, and emphasis on well placed concern over immediate growth prospects within the Euro-zone. Spain struggled to borrow money at acceptable levels overnight, increasing fears again about future prospects. These fears will certainly arise from time to time, and for the most part can be considered general market “noise” for the time being.
Oringinally posted at www.directfx.co.nz