AU Data
- Monday 11.30 Producer Price Index for Q4 2007 previous 2.4% y/y
- Tuesday 11.30 Vehicle Sales for December previous 1.10% m/m
- Wednesday 11.30 Consumer Price Index for Q4 2007 previous 1.9% y/y
- Wednesday 11.30 RBA Trimmed Mean CPI for Q4 2007 previous 2.9% y/y
Last week a dip in Consumer Confidence (-83% m/m ) conuld not deflect attention away from the underlying strong economy as highlighted by Unemployment (4.3%), Housing Finance (+4.0% m/m) and Job Ads (+7.0% m/m). RBA Governor Stevens further fuelled market confidence in a rate hike next month in a hawkish speech that noted Australia had so far missed global credit crunch effects and his concern about short-term inflation trends. The AUD continues to be dogged by equity market weakness (10 consecutive falls) and risk aversion but an underlyingstrong economy and positive interest rate differentials will contain declines. Focus this week CPI release on Wednesday.
NZ Data
- Thursday 07.00 RBNZ Interest Rate Decision
Strong headline Retail Sales (+2.0% m/m) and CPI (+3.2% y/y) failed to give the NZD any lasting support last week. The market concerned that the underlying economy is not strong enough to resist the effects of a global slowdown, especially compared to Australia. In the absence of any major data releases, the market will be focussed on the RBNZ interest rate decision; official rates are expected to remain at 8.25%.
US Data
- Wednesday 00.30 National Activity Index for December previous -0.27% m/m
- Wednesday 02.00 Richmond Fed Composite Index previous -4.00
- Wednesday 09.00 ABC/Washington Post Index previous -24
- Thursday 23.00 MBA Purchase Index previous 461.20 w/e
- Thursday 23.00 Mortgage Market Index previous 906.4 w/e
- Thursday 23.45 ICSC Chain Stores Sales previous 1.1% y/y
Unimpressive economic data, further financial institution write downs and equity market weakness continued to drive currency markets last week. JPY and CHF were the main beneficiaries of dollar weakness. Fed Chairman Bernanke restated his view that the US economy would avoid a full blown recession but commented that fiscal stimulus would be welcomed by the Federal Reserve to underpin further monetary easing. While expectations of an inter-meeting rate cut have dissipated, anything less than 50 basis points on the 30th January would disappoint equity and currency markets greatly.
JPN Data
- Monday 16.00 Revised Leading Indicator for November previous 10.0
- Wednesday 10.30 Tankan Diffusion Index for January previous 21
- Wednesday 10.50 Trade Balance for December previous 797.4b
- Thursday 10.30 Core Consumer Price Index for December previous 0.4% m/m
JPY has been one of the major beneficiaries from USD and equity market weakness, hitting a 2.5 year low last week. A stagnating Japanese economy will continue to put pressure on the BoJ to reduce rates in the near term and the strength of the JPY versus the USD will draw verbal intervention from the Ministry of Finance, though cash intervention is certainly not foreseen at this time.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
6.75% |
+25bps |
07/11/07 |
6th February |
| NZ (RBNZ) |
8.25% |
+25bps |
26/07/07 |
24th January |
| US (FED) |
4.25% |
-25bps |
11/12/07 |
30th January |
| JPN (BOJ) |
0.50% |
+25bps |
21/02/07 |
21st January |