grabber today is the US Fedâ€™s fresh announcement: a 75bp rate cut, and the new
Fed funds rate anywhere between zero and 0.25%. This is much more dovish than
was expected, and risk assets have rallied significantly after the news, which was
released at NZ time as
we write. The US data last
night was worse than expected: CPI, housing starts, and building permits, but
the Fedâ€™s move dominates today. NYMEX oil is down 0.5% to $44, shrinking demand
dominating expected OPEC cuts, and copper is down 1%.
After a tiny
correction yesterday, the NZD has rallied impressively, to
catch-up with the EURâ€™s earlier lead, and was at the highs around 0.5670 just
before the Fedâ€™s decision. It immediately spiked to 0.5735 on the news.
rangebound around 0.67 until mid-Europe session, when it started a slow rally
towards 0.68. The Fed news pushed it immediately to 0.69, and also nudged AUD/NZD
to 1.2040, after as low as 1.19 in Europe.
strong, at 1.40, and has shrugged off hawkish comments by the ECB head, Trichet.
fallen to 89.20, after hugging 90 last night.
Fed established a target range for the fed funds rate of 0 to 0.25% (from 1.0%
previously). Given â€śappreciably diminishedâ€ť inflationary pressures and â€śthe weaker
prospects for economic activityâ€ť, the Fed â€świll employ all available tools to
promote the resumption of sustainable economic growth and to preserve price stability.
In particular, the Committee anticipates that weak economic conditions are likely
to warrant exceptionally low levels of the federal funds rate for some time... The
focus of the Committeeâ€™s policy going forward will be to support the
functioning of financial markets and stimulate the economy through open market
operations and other measures that sustain the size of the Federal Reserveâ€™s
balance sheet at a high level.â€ť
CPI drops 1.7% in Nov; annual rate falls from 3.7% yr to 1.1% yr.
The monthly CPI headline posted its steepest slump since current records began
in 1947. An essentially flat core rate added to the soft prices picture.
housing starts plunge 19% in Nov; permits down 16%. There were
no obvious distortions from the sometimes volatile multiples component of
starts/permits; all four major regions recorded declines. The new build housing
market is imploding in the US. Starts are
down 73% from their peak in January 2006, to the lowest they have ever been
(records began in the 1950s). Why would you buy a new home? Near new homes can
be snapped up for 50% less than they were sold by their builders just two years
ago in some areas; mortgages are hard to secure; potential buyers are worried about
their jobs; and there is a huge over-supply of homes, so prices will fall
October tertiary index rose 0.4%mth, beating median projections for a 0.2% fall.
This left the gauge of service sector activity at â€“1.4%yr, a slight moderation from
-1.5%yr in September, reflecting a departure from the gradual upward trajectory
that saw annual growth of 1.3% in 2007.
advance PMIs keep slipping in Dec. Not dramatic, with the composite factory/services
PMI easing from 38.9 to 38.3. This would be consistent with a Q4 GDP decline of
at least 0.5%.
inflation eased from 4.5% yr to 4.1% yr in Nov. Fuel prices
were down but food prices rose, possibly a function of the recent sharp
depreciation of sterling. Nevertheless Bank of England Governor
Mervyn King wrote in his open letter to the Chancellor that he expected the CPI
to return to 2% target in H1 2009 and then fall lower, possibly requiring a
letter explaining a target undershoot of more than 1% later next year. Nothing
here to prevent further BoE rate cuts.
maintains its strength today, and 0.56 provides strong support. The rally should
temporarily slow down around the 0.58 chart level.
Country Release Last Forecast
17 Dec Aus
Oct Westpac-MI Leading Index 1.1% â€“
Merchandise Imports AUDbn 21.9 â€“
Current Account Deficit $bn â€“183.1 â€“177.0
Eur Nov CPI
(F) %yr 2.1%a 2.0%
UK Dec BoE
Unemployment châ€™ 36.5k 45.0k
Retail Survey â€“46 â€“50
Wholesale Sales 1.5% â€“2.0%
18 Dec NZ
Half Year Economic and Fiscal Update
Business Confidence â€“43.0% â€“
â€˘ NZ Q3
Current Account Preview (16 December)
â€˘ NZ Weekly
Forex Outlook (16 December)
Preview (15 December)
â€˘ NZ Q3
Terms of Trade (10 December)
â€˘ NZ Agribiz
December 2008 (9 December)
â€˘ NZ Weekly
Forex Outlook (8 December)
â€˘ RBNZ MPS
Review (4 December)
papers/publications are available on Online Research on Westpac
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Mon 19 Mar 2018 Tue 20 Mar 2018 AA 9:30 GB- CPI A 10:00 DE- ZEW Survey Wed 21 Mar 2018 AA 03:00 AU- Employment AA 9:30 GB- Employment A 12:30 US- Current Account AA 14:00 US- Existing Homes Sales A 14:30 US- EIA Crude A A18:00 US- Fed Rate Decision A 21:00 NZ- RBNZ Rate Decision Thu 22 Mar 2018 AA All Day flash PMIs AA 9:30 GB- Retail Sales AA 12:00 GB- Bank Of England Decision A 13:30 US- Weekly Jobless Fri 23 Mar 2018 AA 12:30 CA- CPI/Retail Sales A 12:30 US- Durable Goods A 14:00 US- New Homes Sales
John M. Bland, MBA co-founding Partner, Global-View.com
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