remain rangebound, with the overall trend dictated by major global equity markets,
and punctuated by the occasional large foreign exchange transaction (such as occurred
last night in Europe). Comments
from policymakers in the US and down
under indicate a gloomy outlook for some time yet.
stopped hugging the 0.55 level during the European session when the large EUR
and GBP orders were seen. The 70 pip spike upwards lasted about 4 hours, and
this morning sees it trading slightly under its previous level, at 0.5480. The
slightly softer tone likely due to the Dow Jones index down by 3.2% at time of
writing. Fonterra announced their issue of a 5 year GBP 225 million bond. Blue
chip NZ companies can access credit internationally, but must pay the price â€“
in this case, a credit spread of 450 basis points.
AUD was locked
in a tight range of 0.6470 to 0.6490 before the orders, and spiked to 0.6580.
Similarly to the NZD, it is currently softer at 0.6470.
action last night was in the EUR and GBP, with very
large buying orders, seen in both. EUR jumped from around 1.26 to 1.28 as the
transactioned was cleared by the market, and returned to its previous level
afterwards, for no net change on the day. As expected, US CPI inflation,
including the core measure, was lower, and retains the case for continued
easing. China continued
the risk aversion theme by saying US treasury
bonds remain the preferred safe
CPI drops 1.0% in Oct. The US CPI headline posted it steepest slump
since at least World War 2 when the current index was first devised, with the
first significant monthly decline (â€“0.1%) in the core CPI since 1982
contributing to that result. Retail gasoline prices fell â€śonlyâ€ť 14.2% in
October, less than the 20% fall that we had expected based on weekly data from
the Department of Energy. That explains all of the difference between the â€“1.0%
outcome and Westpacâ€™s â€“1.2% forecast. Food prices surprised with a 0.3% gain (they
should start falling imminently) but apparel off 1.0%, new vehicle prices down
0.5%, airfares down 4.6% and hotel accommodation down 1.6% provided plenty of
offset. Also there were below trend gains for medical care (0.2%), ownersâ€™
equivalent rent (0.1%) and recreation (0.1%). With gasoline prices still
plunging, food about to become a drag, prices being discounted to stimulate
sales, lower transport costs being passed on to retail prices (such as
airfares) and the US dollar rising the CPI will continue to fall sharply,
contributing to lower inflation expectations and demolishing any vestigial
arguments against further Fed easing.
housing data were sickeningly weak. Starts posted another 4.5% decline in Oct, but
in the detail we saw that new permits to build single family homes nose-dived
nearly 15%, confirming that new house-building activity is about to step down
sharply yet again, dashing hopes that the drag on the economy from new housing
investment might soon diminish.
minutes of the 28-29 Oct FOMC meeting revealed an appropriately gloomy outlook on
the US economy.
Members saw little or no growth in 2008, and forecasts for 2009 ranged from
-0.2% to 1.1%. Inflation was expected to â€śdiminish materiallyâ€ť, with some
highlighting a risk of deflation, and unemployment was forecast to peak above
7% next year. There was some debate as to the efficacy of a large rate cut,
given that rates were already very low, but the committee agreed that it would
do whatever was necessary to support the economy.
Bank of England
published the minutes to the Nov policy meeting when they
cut rates 150bp to 3.0%. They revealed a unanimous 9:0 decision, and discussion
of potentially cutting rates 200bp at the time, However the minutes noted that
likely fiscal stimulus to be announced Monday in the Pre-Budget-Report, and a
desire to keep some rate cutting in reserve to provide a future confidence
boost saw them limit the cut to 150bp on the day â€“ which was still a big
surprise at the time.
leading index down 0.3% in Oct, pointing to a deteriorating economic outlook
for 2009 even though Canadian domestic economic data has held up relatively
well until now.
retains its weak bias. Todayâ€™s action should be confined to a narrow 0.5475 to 0.5560
range, barring equity market surprises. During the next week, we expect 0.58 to
cap any rise, while 0.5350 is a key support level which, if broken, does not
augur well for the NZD.
Release Last Forecast
Jobless Claims w/e 15/11 516k 505k
Nov Philadelphia Fed Index â€“37.5
Indicators 0.3% â€“0.7%
Trade Balance ÂĄbn, nsa 88.5 71.8
Ger Oct PPI
%yr 8.3% 7.5%
UK Oct Retail
Sales â€“0.4% â€“0.6%
ÂŁbn 12.6 â€“2.5
Supply M4 %yr 12.4% 12.7%
Wholesale Sales â€“1.5% â€“0.5%
â€˘ NZ Weekly
Forex Outlook (17 November)
â€˘ NZ Q3
Retail Sales Review (13 November)
Economic Overview November 2008 (11 November)
â€˘ NZ Weekly
Forex Outlook (11 November)
â€˘ NZ Weekly
Forex Outlook (4 November)
â€˘ NZ Q3 HLFS
Review (6 November)
papers/publications are available on Online Research on Westpac
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