AU Data
- Wednesday 09.50 Westpac/Melbourne Institute Leading Index 0.2% m/m
The big market mover for last week was Employment Change, which fell 19,700 in May against market expectations of a 13,500 increase. The Unemployment Rate also unexpectedly ticked up to 4.3% from 4.2%. This was the first time employment has fallen since October 2006 and fuelled a sharp AUD sell-off that had started earlier in the week on the back of weak Home Loans (-3.0%), Business Confidence (-4) and Consumer Sentiment (-5.6%, to a 15 year low); the AUD depreciated by 2.55% against the USD in the week. RBA Governor Stevens’ speech steadied the market on Friday as he acknowledged that domestic demand was cooling but warned that the stimulus from the trade boom and high commodity prices means tight monetary policy remains essential. A thin week for data from Australia will put even more focus on the global economy and the direction of inflation and interest rates.
NZ Data
- Monday 08.45 Manufacturing Sales previous 8.3% q/q
- Friday 08.45 Visitor Arrivals previous -11.8% m/m
The NZD was kept on the back foot for most of the week as a stronger USD sentiment and weak domestic data kept buyers out of the market. Performance of Manufacturing Index (49.3) and Core Retail Sales (-0.5%) highlighted the reasons for the receding confidence of both producers and consumers that are struggling to contend with a strong currency, high interest rates and a global market slowdown. Inflation concerns were not relieved by release of the Food Price Index (+1.0%) that will continue to pressure headline inflation and squeeze consumer disposable income. This week’s Manufacturing Sales is not expected to provide much of a boost for the currency and international data will dictate market sentiment.
US Data
- Monday 22.30 Empire State Business Conditions Index previous -3.2
- Monday 23.00 Treasury International Capital Net Long-Term Transactions previous $80.4b
- Tuesday 03.00 Pending Home Sales Index previous 19
- Tuesday 22.30 Housing Starts previous 1.03m
- Tuesday 22.30 Producer Price Index previous 0.2% m/m
- Tuesday 22.30 Building Permits previous 0.98m
- Tuesday 22.30 Core Producer Price Index previous 0.4% m/m
- Tuesday 22.30 Current Account previous -$173b
- Tuesday 23.15 Capacity Utilisation Rate previous 79.7%
- Tuesday 23.15 Industrial Production previous -0.7% m/m
- Thursday 24.00 Philadelphia Fed Manufacturing Index previous -15.6
- Thursday 24.00 Leading Index previous 0.1% m/m
Positive USD sentiment continued to build last week as traders took confidence from strong dollar rhetoric from Fed Reserve and Treasury officials; the currency has been underpinned by slightly better economic data. The value of a strong US dollar as a tool in the battle to keep inflation under control (fuelled by soaring fuel and commodity prices) was expected to prompt a response from this weekend’s G8 Finance Ministers meeting, but reports suggest that the exchange rate was not even discussed and US Treasury Secretary Paulson even denied any link between a weak US dollar and surging oil prices. This is despite a paper from the Dallas Fed stating that the dollar slide was responsible for one-third of the rise of $60 in oil prices from 2003 to 2007. It seems the US is quite happy to risk inflation and benefit from increased export competitiveness, at least for the moment. The market’s response to this continued ‘benign neglect’ for the dollar by US policy makers should be watched closely along with another full week for economic data releases.
JPN Data
- Tuesday 09.50 Tertiary Industry Activity Index previous 0.3% m/m
- Wednesday 09.50 Monetary Policy Meeting Minutes
- Thursday 09.50 All Industries Activity Index previous 0.5% m/m
The Japanese economy grew at a faster pace than previously estimated in the first quarter due to an increase in corporate capital spending, but the momentum is set to lose steam in the current quarter amid a slowing global economy and rising material costs. Gross domestic product rose 1.0%, in real terms, in the three months to March from the fourth quarter of 2007, or an annualised rate of 4.0%. It was the fastest pace of growth since January-March 2007 when the economy expanded 1.1% on the quarter and at an annualised rate of 4.5%. The revised figures came with data showing that wholesale prices (+4.7% annualised) in the world's second-largest economy jumped at their fastest pace in 27 years in May due to surging commodity prices. However, the Consumer Confidence index slid to 33.9 in May, hitting its lowest level since December 2001 when it stood at 33.0 and down from 35.2 in April, amid mounting worries about a weakening economy, employment and wage conditions, and rising consumer prices. Japan’s reliance on export markets for economic growth becomes ever more important with sensitivity to the exchange rate and surging raw material prices becoming even more critical for company profits and future capital expenditure plans.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
7.25% |
+25bps |
04/03/08 |
1st July |
| NZ (RBNZ) |
8.25% |
+25bps |
26/07/07 |
24th July |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
25th June |
| JPN (BOJ) |
0.50% |
+25bps |
21/02/07 |
15th July |