Currencies continued to look to equity markets for
direction, ensuring another rollercoaster ride on Friday night. The major
currencies were flat or slightly higher against the US dollar during the New York session, but US equities gave up the ghost near the
end of the day, with the Dow dropping 400pts to end on its lows for the day.
Disappointment with the G20 statement over the weekend is likely to see further
safe-haven flows into the USD as markets begin the week. As with the G7 meeting
last month, the statement was full of good intentions but little in the way of
near-term solutions, beyond recommending more of the same - aggressive fiscal
and monetary stimulus.
NZD again held a relatively tight range, until the
end of day slump in US equities took the currency below 0.5550. The
disappointing G20 statement saw the NZD open this morning at a three-week low
of 0.5510. AUD was one of the better performers early in the overnight session,
reaching 0.6650, before slumping back to 0.6450 this morning.
EUR shrugged off confirmation that the euro zone is
in recession, and looked to be ending the day on a high of 1.2800, before the
late US equity collapse pulled it back to 1.2550. GBP had a
bid tone early on and outperformed EUR for the first time all week, but
eventually succumbed to the same fate as the other currencies. USD/JPY was the
only 'carry trade' to hold its ground as equities plunged, but the G20
statement saw it open a big figure lower at 96 this morning.
US retail sales falls 2.8% in Oct. Retail sales
posted their steepest monthly decline since the current series was established
in the early 1990s, with the 2.8% slump just shy of Westpac's forecast 3% fall.
Auto sales were a key drag. The other factor which exaggerated sales weakness was
lower gasoline prices, down 20% in October compared to September, which shaved
1.3ppt off the nominal retail headline. Core retailing excluding these
components (autos & gas) was down a modest 0.5% but that is the third consecutive
month of decline and adds weight to the view that Q3's consumer spending
contraction will persist into Q4.
US consumer sentiment was little changed at 57.9 in the
early November survey from the Uni of Michigan. That compares to the 25% jump
in the IBD-TIPP survey for November. Just goes to show - survey different
people on different days and you can get very different responses. Collapsing gasoline
prices and the Obama election win clearly had less impact in the later survey;
we now await the Conference Board survey at the end of the month.
Other US data included a 4.7% plunge in import prices in
October, reflecting falling oil prices and the stronger US dollar; and a 0.2%
in business inventories in September. Speaking in Frankfurt at a conference celebrating
10 years of the euro, Fed chair Bernanke said central banks globally stood
ready to take "additional steps" without specifying what they might
Q3 GDP data confirmed today that the Euroland economy
has been in recession since about Easter this year. GDP fell 0.2% in Q2 and Q3;
the contraction to date has been mild, thanks in part to modest 0.1% growth in France in Q3, and stalled rather than negative growth in Holland in the last two quarters.
Euroland inflation was confirmed at 3.2% yr in
October (unrevised from the flash estimate), and the core rate was unchanged at
1.9% yr. With pipeline price pressures easing and the economy now in recession,
there is now considerable risk that inflation will fall well below 2% next
Canadian auto sales rose 2.5% in September, after
three monthly declines in June to August; StatCan guidance for October was that
sales "edged down" again. Manufacturing shipments rose 0.1% in
September after falling 3.7% in August. A decline had been expected, but a
surprise jump in the aerospace component (probably temporary given recent weak
orders) prevented that.
We are neutral on NZD in the short term. News from
the corporate world is dominating investor sentiment at the moment, but we feel
this should be at least balanced out by the extent of fiscal stimulus and other
government support that is being unleashed around the world. Looking ahead, NZD
will need to remain below its long-term average for an extended period to
soften the blow of a weaker world economy.
Country Release Last Forecast
17 Nov NZ
Oct Food Prices 0.6% β
Aus Q3 Real
Retail Sales β0.6% 0.5%
US Nov NY FedEmpireState Index β24.6
Industrial Production β2.8% 0.5%
Jpn Q3 GDP
%qtr β0.7% flat
Trade Balance β¬bn β9.3 β6.0
UK Nov House
Prices %yr β4.9% β6.0%
18 Nov Aus
Nov RBA Board Meeting Minutes
Merchandise Imports AUDbn 21.0 β
Producer Prices β0.4% β2.2%
β’ NZ Q3
Retail Sales Review (13 November)
Economic Overview November 2008 (11 November)
β’ NZ Weekly
Forex Outlook (4 November)
β’ NZ Q3 HLFS
Review (6 November)
β’ NZ Weekly
Forex Outlook (4 November)
β’ NZ Q3 LCI
and QES Review (3 November)
papers/publications are available on Online Research on Westpac
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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