HiFX: Foreign Exchange Specialists

• Weekly briefings

AU Data

• Mon 11.30 New Motor Vehicle Sales previous 2.9% m/m 
• Tue 10.00 CB Leading Index previous 1.8% m/m 
• Wed 09.20 RBA Deputy Governor Battellino Speech   
• Wed 11.30 Construction Work Done previous -0.1% q/q expectation 0.1%
• Thu 11.30 Private Capital Expenditure previous 3.3% q/q expectation 1.1%

Last week’s Melbourne Institute Leading Index rose 2.2 points to 255.1 in September with three (the all ordinaries share index, AU dwelling approvals, and US industrial production) of the four components making positive contributions; only the real money supply was negative. The growth component of the index surged to 5.8% and, if proved to be accurate, would see GDP growth in excess of 3.5% in 2010. The RBA monetary policy meeting minutes for November cooled market expectations of a rapid rise in official rates as the Board signalled further “gradual” increases and “the pace of adjustment remained an open question”. The market is now discounting only a 45% probability that rates will be raised again in December by 25 basis points. Two important elements of the confidence and potential growth in the economy will be seen this week with Construction and Private Capital Expenditure.

NZ Data

• Mon 08.45 Visitor Arrivals previous 3.8% m/m Act -0.7%
• Thu 13.00 NBNZ Business Confidence previous 48.2  
• Fri 08.45 Trade Balance previous -424m expectation -469m
• Fri 13.00 Inflation Expectations previous 2.3% q/q

Producer Price data last week showed no pipeline pressure on inflation in Q3 and therefore no cause as yet for the RBNZ to waiver from its stated course of keeping interest rates low until H2 2010. Producer input prices declined 1.1% q/q led by milk (-21%) and power (-8.2%), producer output prices fell by 1.4% q/q. Credit card billings edged up in October (+0.2% m/m) but are still 0.4% lower than a year ago, as consumers remain cautious amid continued job insecurity and anaemic growth. This week Business Confidence will be watched for any further slippage from 10 year highs.

US Data

• Tue 02.00 Existing Home Sales previous 5.57m expectation 5.72m
• Wed 00.30 Preliminary GDP previous 3.5% q/q expectation 3.0%
• Wed 00.30 Preliminary GDP Price Index previous 0.8% q/q expectation 0.8%
• Wed 01.00 Composite-20 House Price Index previous -11.3% y/y expectation -9.1%
• Wed 02.00 CB Consumer Confidence previous 47.7 expectation 47.6
• Wed 02.00 House Price Index previous -0.3% m/m expectation 0.2%
• Wed 02.00 Richmond Fed Manufacturing Index previous 7 expectation 10
• Wed 06.00 FOMC Meeting Minutes     
• Thu 00.30 Core Durable Goods Orders previous 0.9% m/m expectation 0.8%
• Thu 00.30 Durable Goods Orders previous 1.4% m/m expectation 0.5%
• Thu 00.30 Unemployment Claims previous 505k expectation 500k
• Thu 00.30 Core PCE Price Index previous 0.1% m/m expectation 0.1%
• Thu 00.30 Personal Spending previous -0.5% m/m expectation 0.6%
• Thu 00.30 Personal Income previous 0.0% m/m expectation 0.2%
• Thu 01.55 Revised UoM Consumer Sentiment previous 66.0 expectation 67.2
• Thu 01.55 Revised UoM Inflation Expectations previous 2.8%  
• Thu 02.00 New Home Sales previous 402k expectation 408k
• Fri All Day Bank Holiday 

Headline October Retail Sales (+1.4% m/m) beat market expectations as auto sales rebounded from a very weak September, but a sharp downward revision to the previous month (-2.3% from -1.5% m/m) and much weaker core retail sales (+0.2% m/m) that excludes autos put the capacity and willingness of households (the saviour of previous recessions) to drag the economy into sustained recovery into doubt. Industrial Production (0.1% m/m) was weaker than expected in October but managed to record its 4th straight monthly increase, however Capacity Utilisation (70.7%) is a full 10 points below its 1972-2008 average and indicates considerable slack still available to manufactures. Housing data continued its indifferent run with Housing Starts (0.529m) dropping to the lowest level in 6 months and Building Permits (0.552m) dropping back 4% in October. Further evidence of on-going housing market problems was the fall in mortgage applications that hit a 12-year low even as long-term mortgage rates were down at the lowest level for 6 months. This week preliminary GDP, more housing data and Durable Goods will be watched closely.

JPN Data

• Mon All Day  Bank Holiday    
• Tue 16.00 BOJ Monthly Report      
• Wed 10.50 Trade Balance previous 0.06t expectation -0.31t
• Wed 10.50 Corporate Services Price Index previous -3.2% y/y expectation -2.5%
• Thu 10.50 Monetary Policy Meeting Minutes    
• Fri 10.30 Household Spending previous 1.0% y/y expectation 0.6%
• Fri 10.30 Tokyo Core CPI previous -2.2% y/y expectation -2.0%
• Fri 10.30 National Core CPI previous -2.3% y/y expectation -2.2%
• Fri 10.30 Unemployment Rate previous 5.3% expectation 5.4%
• Fri 10.50 Retail Sales previous -1.3% y/y expectation -1.5%

Japan’s Q3 GDP rose at an annual rate of 4.8%, beating market forecasts and recording the 2nd straight advance after the nation’s deepest post-war recession. The pace of expansion was the fastest for 2 years and reflected improving economic activity around the world that has given domestic companies the confidence to increase capital spending 1.6% in the quarter. However, 30% of Japan’s manufacturing capacity is still idle and with consumer spending still subdued by job insecurity and low wages the government remains under pressure to maintain stimulus programmes. The BOJ left rates unchanged and upgraded its assessment of the economy but reassured markets that it will keep monetary policy at very accommodative levels for some time. The Government is at odds with the BOJ’s rosy assessment of the economy and has pledged to continue stimulus into next year but is constrained by already stretched fiscal budgets.

Interest rate outlook