HiFX: Foreign Exchange Specialists

• Weekly briefings

AU Data

• Tue 10.30 NAB Business Confidence previous 18  
• Wed 10.00 Westpac Consumer Sentiment previous 5.2%  
• Wed Tentative NAB Quarterly Business Confidence previous -4  
• Thu 09.30 RBA Governor Stevens Speech    
• Thu 10.00 MI Inflation Expectations previous 3.5%  
• Thu 10.30 RBA Monthly Bulletin      

The biggest news of last week was the decision by the RBA to hike rates by 25 basis points. The increase, though well flagged by RBA Governor Stevens, surprised the market and propelled the AUD to a weekly high of 0.9090, a level not seen since August 2008. The early move to start to ‘normalise’ monetary policy is the first among the G20 countries and looks to be the first of a series of increases that will see rates back to 4.50 by mid-2010. The RBA decision was vindicated by the subsequent release of employment data that showed full-time employment growing by 35,400, reversing a 30,800 fall the previous month, and the Unemployment Rate dropping to 5.7% from 5.8%. This week Business and Consumer Confidence releases will be watched for continuing improvement, however the surveys will not reflect last week’s hike in official interest rates but future releases will show how robust confidence is in the face of a tightening monetary policy environment.

NZ Data

• Tue 07.45 Retail Sales previous -0.5% expectation m/m 0.6%
• Tue 07.45 Core Retail Sales previous -0.5% m/m expectation 0.5%
• Thu 07.30 Business NZ Manufacturing Index previous 48.7  
• Thu 07.45 Consumer Price Index previous 0.6% q/q expectation 0.8%
• Thu 07.45 Food Price Index previous -0.9% m/m 

The respected NZIER quarterly survey of business confidence jumped to its highest level in a decade in Q3 as a net 36% of firms now expect general business conditions to improve in the next 6 months, reversing the previous surveys net 25% of respondents expecting conditions to worsen. The survey was not all rosy as employment and investment intentions still remain mired in negative territory. The recent improvement in business confidence is, as yet, not being translated into real activity and may be reflecting relief that the worst is over more than anything else. Immediate prospects for official interest rates remain unchanged with the first rate hike not expected until Q1 2010; one of the main reasons to defer monetary tightening is the strength of the NZD that has appreciated by 23% so far in 2009 (high last week 0.7450) and will continue to be a drag on the GDP significant export sector. This week, the Manufacturing Index will be watched for a break above the expansionary 50 level.

US Data

• Tue Tentative FCM Financial Data Report     
• Wed 00.00  IBD/TIPP Economic Optimism   52.5  53.7
• Wed Tentative Federal Budget Balance   111.4b  -77.3b
• Wed 22.30  Core Retail Sales    1.1% m/m 0.3%
• Wed 22.30  Retail Sales     2.7% m/m -2.0%
• Wed 22.30  Import Prices     2.0% m/m 0.3%
• Thu 00.00  Business Inventories    -1.0% m/m -0.8%
• Thu 04.00  FOMC Meeting Minutes     
• Thu 22.30  Core CPI     0.1% m/m 0.1%
• Thu 22.30  CPI      0.4% m/m 0.2%
• Thu 22.30  Unemployment Claims    521k  525k
• Thu 22.30  Empire State Manufacturing Index  18.9  18.4
• Fri 00.00  Philly Fed Manufacturing Index  14.1  12.4
• Fri 23.00  TIC Long-term Purchases   15.3b  10.9b
• Fri 23.15  Capacity Utilisation    69.6%  69.8%
• Fri 23.15  Industrial Production    0.8% m/m 0.1%
• Fri 23.55  Preliminary UoM Consumer Sentiment 73.5  73.6
• Fri 23.55  Preliminary UoM Inflation Expectations 2.2%  

The ISM Non-manufacturing PMI (50.9) showed expansion for the first time in 12 months and gave further evidence that the US economy is gradually recovering. Non-manufacturing (service industries) is extremely significant as it contributes almost 90% to GDP and indicates that the emerging recovery is spreading from housing and factories to the broader economy. Forward looking sub-indices of the survey were also positive as new orders rose to the highest level since October 2007 and employment rose to 44.3, the highest since August 2008 and signalled that the pace of job cutting was decelerating. Other data showed that Consumer Credit (-12.0b) continues to fall as households reduced debt for the 7th straight month and Wholesale Inventories (-1.3% m/m) dropped for the 12th consecutive month, clearing the way for a pick-up in orders as and when sales start to improve. Towards the end of the week, Federal Reserve Chairman Bernanke underpinned the growing positive sentiment with comments that were interpreted as being hawkish and raised the prospect that the Fed was closer to raising rates than previously expected. The comments helped the USD Index (a measure of the USD against a basket of currencies) bounce off a 14 month low but did not phase equity market indices that recorded their best weekly gains since mid-July. A full diary of economic indicators will be watched closely along with key company earnings reports due for release this week.

JPN Data

• Tue 09.50 Bank Lending previous 1.8% y/y 
• Tue 09.50 M2 Money Stock previous 2.8% y/y expectation 2.9%
• Wed Tentative Monetary Policy Statement     
• Wed Tentative BOJ Interest Rate Decision previous 0.10% expectation 0.10%
• Wed 15.00 Household Confidence previous 40.1 expectation 41.4
• Wed Tentative BOJ Press Conference     
• Thu 14.30 Revised Industrial Production previous 1.8% m/m expectation 1.8%
• Thu 15.00 BOJ Monthly Report      
• Fri 16.35 BOJ Governor Shirakawa Speech  

September’s Economy Watchers Sentiment Index, a survey of barbers, taxi drivers and others who deal directly with consumers, climbed to 43.1 and reversed the first fall in 8 months recorded in August (41.7). The improvement in sentiment doesn’t indicate the economy is gaining any traction as the unemployment rate (5.5%) is close to record highs and wages have dropped for 15 straight months, forcing households to continue to rein back spending. The general malaise of the Japanese economy was reflected in Core Machinery Orders (+0.5% m/m) that rose less than expected (+2.1% m/m) in August as insecurity about future demand dampened any recovery in capital expenditure. Compared with a year earlier, core orders are down 26.5% and in terms of value are at the second lowest level on record. With manufacturing over capacity of production still very high, it will be at least 6 months before any positive contribution to GDP will be seen from capital expenditure. This week’s interest rate decision will not bring any surprises (no change) and eyes will be on overseas data to gauge future prospects for the export dependent Japanese economy.

Interest rate outlook