HiFX: Foreign Exchange Specialists

• Weekly briefings

AU Data

• Mon 11.30 Producer Price Index previous 0.1% q/q expectation 0.1%
• Mon Tentative NAB Business Confidence previous 19  
• Tue All Day Bank Holiday       
• Wed 10.30 Melbourne Institute Leading Index previous 0.4% m/m 
• Wed 11.30 Consumer Price Index previous 1.0% q/q expectation 0.4%
• Wed 11.30 Trimmed Mean CPI previous 0.8% q/q expectation 0.6%
• Fri 10.00 CB Leading Index previous -0.3% m/m 
• Fri 11.30 Private Sector Credit previous 0.1% m/m expectation 0.1%

A private measure of inflation, the TD-MI Inflation Gauge, rose for a 2nd straight month in December, suggesting the low for inflation has been seen and price pressures were set to pick during the year. The annual pace of inflation picked up to 2.6% from 2.1% a month earlier and although still within the RBA’s 2-3% target range is markedly higher than the 1.2% trough seen in October. Westpac Consumer Sentiment (+5.6%) bounced back after 2 months of falls and is now 33% higher than the level seen in January 2009. Improving employment conditions have buoyed sentiment despite a record 3 consecutive hikes in official rates and even steeper rates rises from the big four commercial banks. This week’s consumer price data, particularly the RBA’s preferred trimmed mean CPI, will be closely watched for further justification for another rate hike on February 2 after strong retail sales and employment data in recent weeks.

NZ Data

• Tue 13.00 Credit Card Spending previous 1.6% y/y 
• Thu 07.00 RBNZ Interest Rate Decision previous 2.50% expectation 2.50%
• Thu 07.00 RBNZ Monetary Policy Statement    
• Fri 08.45 Building Consents previous 1.2% m/m 
• Fri 08.45 Trade Balance previous  -269m expectation -99m

US Data

• Tue 02.00 Existing Home Sales previous 6.54m expectation 5.98m
• Wed 01.00 Composite-20 House Price Index previous -7.3% y/y expectation -4.9%
• Wed 02.00 CB Consumer Confidence previous 52.9 expectation 53.6
• Wed 02.00 House Price Index previous 0.6% m/m expectation 0.5%
• Wed 02.00 Richmond Manufacturing Index previous -4 expectation 0
• Thu 02.00 New Home Sales previous 355k expectation 372k
• Thu 06.15 Fed Reserve Interest Rate Decision previous <0.25% expectation <0.25%
• Thu 06.15 FOMC Statement      
• Fri 00.30 Core Durable Goods Orders previous 2.0% m/m expectation 0.4%
• Fri 00.30 Durable Goods Orders previous 0.2% m/m expectation 2.1%
• Fri 00.30 Unemployment Claims previous 482k expectation 451k
• Sat 00.30 Advance GDP previous 2.2% q/q expectation 4.5%
• Sat 00.30 Advance GDP Price Index previous 0.4% q/q expectation 1.3%
• Sat 00.30 Employment Cost Index previous 0.4% q/q expectation 0.4%
• Sat 01.45 Chicago PMI previous 58.7 expectation 57.2
• Sat 01.55 Revised UoM Consumer Sentiment previous 72.8 expectation 73.2
• Sat 01.55 Revised UoM Inflation Expectations previous 2.8%

The NAHB Housing Market Index (15) unexpectedly fell in January to its lowest level since June 2009 as concerns over weak labour markets, tight lending conditions and high foreclosure volume weighed on sentiment. Although sentiment has certainly improved and stabilised since the record low of 8 seen in January 2009, the Index is still way below the 50 level that indicates more builders view sales conditions as poor than good. Other measures of building activity, Building Permits (0.65m) and Housing Starts (0.56m) were mixed; housing starts were affected by unusually cold weather but permits jumped to a 14-month high and boosted confidence that the slow recovery in house construction after a 3-year slump could resume over the next few months. The housing market is at the heart of the economic problems in the US and the Federal Reserve will be reluctant to raise rates until this sector of the economy is showing signs of a durable recovery. The Philly Fed Manufacturing Index (15.2) slipped back from the a 4½-year high but with the forward looking outlook and capital spending sub-indices still trending higher the picture is consistent with solid manufacturing growth over the coming months. More housing market data this week will complete the current picture for the sector and the language in the post-decision FOMC statement will be watched closely for hints as to the timing of monetary policy tightening.

JPN Data

• Tue 10.50 Corporate Services Price Index previous -2.0% y/y expectation -1.4%
• Tue All Day BOJ Interest Rate Decision previous 0.10% expectation 0.10%
• Tue All Day BOJ Monetary Policy Statement    
• Wed 10.50 Trade Balance previous 0.49t expectation 0.61t
• Wed 16.00 BOJ Monthly Report      
• Thu 10.50 Retail Sales previous -1.0% y/y expectation 0.3%
• Fri 10.15 Manufacturing PMI previous 53.8  
• Fri 10.30 Household Spending previous 2.2% y/y expectation 1.6%
• Fri 10.30 Tokyo Core CPI previous -1.9% y/y expectation -1.8%
• Fri 10.30 National Core CPI previous -1.7% y/y expectation -1.3%
• Fri 10.30 Unemployment Rate previous 5.2% expectation 5.3%
• Fri 10.50 Monetary Policy Meeting Minutes    
• Fri 10.50 Preliminary Industrial Production previous 2.2% m/m expectation 2.5%
• Fri 16.00 Housing Starts previous -19.1% y/y expectation -18.8%

Consumer Confidence (37.6 from 39.5) deteriorated further in December as job insecurity and lower incomes undermined sentiment; the confidence index remains solidly well below the 50 level separating pessimism from optimism. Weakening consumer confidence was reflected in Tertiary Industry Activity (-0.2% m/m) as demand for services, which account for 63% of GDP, waned. Extended government stimulus packages are having less and less impact as consumers increase levels of saving and refrain from replacing relatively new durable goods such as cars and home appliances. This week’s BOJ interest rate decision will not bring any changes to official rates but the statement will be scrutinised for any further quantitative easing measures.

Interest rate outlook