HiFX: Foreign Exchange Specialists

• Weekly briefings

AU Data

• Mon Tentative NAB Quarterly Business Confidence previous previous -4 
• Mon 11.30 Producer Price Index previous -0.8% q/q expectation 0.3%
• Wed 11.30 Consumer Price Index previous 0.5% q/q expectation 0.9%
• Wed 11.30 Trimmed Mean Consumer Prices previous 0.8% q/q expectation 0.8%
• Thu 10.00 Conference Board Leading Index previous 0.7% m/m
• Thu Tentative HIA New Home Sales previous 11.4% m/m
• Fri 11.30 Private Sector Credit previous 0.1% m/m expectation 0.2%

Release of the RBA Monetary Policy Meeting minutes showed a clear shift in emphasis to inflation watch as the policy setting board raised official rates by 25 basis points to 3.25%. The surprise early hike, the first among G20 countries, helped the already buoyant AUD to a new 14 month high at 0.9326 last week and with the central bank concerned about missing its 2-3% inflation target the market has been swiftly re-assessing the pace of future increases. Another 25 basis point increase on Melbourne Cup day is now fully discounted and key Consumer Price data this week may prompt a more substantial hike. Other releases saw Australia’s terms of trade (receivables from exports compared to payables from imports) fall a further 7% in Q3 following the 15% drop in Q2. Despite the declines the RBA maintains that trade terms are still at very high levels, fuelled largely by Chinese demand for raw materials. As above, CPI will focus much attention this week along with Business Confidence and New Home Sales.

NZ Data

• Mon Bank Holiday      
• Wed 13.00 NBNZ Business Confidence previous 49.1 
• Thu 07.00 RBNZ Interest Rate Decision previous 2.50% expectation 2.50%
• Thu 07.00 RBNZ Monetary Policy Statement   
• Thu 08.45 Trade Balance previous  -725m expectation -680m
• Fri 08.45 Building Consents previous 1.7% m/m

In good news for the general economy both permanent/long-term migrants (+17k y/y) and visitor arrivals (+9.3% y/y) recorded strong growth in September. The net gain in permanent migrants was the highest annual rise in 5 years and looks to be stabilizing after tighter immigration rules and the global financial crisis drove more New Zealanders overseas. Short-term arrivals recorded the largest monthly gain since April 2006, led by visitors from Australia and the US. The RBNZ has cited recent strong migration as a factor for improvements in the property market and domestic demand, however, consumers remain cautious as the country battles to emerge from recession as seen in a fall in Credit Card Spending (-1.0% m/m) that has been reined back due high interest rates and a reluctance to incur discretionary debt. RBNZ Governor Bollard helped drive the NZD to a 15 month high (0.7634) last week after commenting that a high exchange rate is not necessarily an impediment to raising interest rates; this week’s interest rate decision is not expected to bring any change as the market consensus is for rates to stay on hold until mid-2010.

US Data

• Tue 19.30 Treasury Secretary Geithner Speech   
• Wed 00.00 Composite 20 House Price Index previous -13.3% y/y expectation  -11.9%
• Wed 01.00 CB Consumer Confidence previous 53.1 expectation 54.1
• Wed 01.00 Richmond Fed Manufacturing Index previous 14 expectation 14
• Wed 23.30 Core Durable Goods Orders previous 0.0% m/m expectation 0.6%
• Wed 23.30 Durable Goods Orders previous -2.6% m/m expectation 1.2%
• Thu 01.00 New Home Sales previous 429k expectation 443k
• Thu 23.30 Advance GDP previous -0.7% q/q expectation 3.1%
• Thu 23.30 Unemployment Claims previous 531k expectation 522k
• Thu 23.30 Advance GDP Price Index previous 0.0% q/q expectation 1.2%
• Fri 23.30 Core PCE Price Index previous 0.1% m/m expectation 0.2%
• Fri 23.30 Employment Cost Index previous 0.4% q/q expectation 0.4%
• Fri 23.30 Personal Spending previous 1.3% m/m expectation -0.4%
• Fri 23.30 Personal Income previous 0.2% m/m expectation 0.1%
• Sat 00.45 Chicago PMI previous 46.1 expectation 48.6
• Sat 00.55 Revised UoM Consumer Sentiment previous 69.4 expectation 70.1
• Sat 00.55 Revised UoM Inflation Expectations previous 2.8%

Three out of the four housing market releases failed to meet market expectations last week but overall the sector is expected to boost economic growth in Q3, which would be the first positive contribution since the end of 2005. NAHB Housing Market Index (18, exp. 20), Building Permits (0.57m, exp. 0.59m) and Housing Starts (0.59m, exp. 0.62m) all disappointed, but Friday saw Existing Home Sales (5.57m, exp. 5.39m) jump 9.4% m/m to a 2 year high; even this can be downplayed as being due, at least in part, to the impending expiry (November) of the first-time buyers tax credit that has cost the government $10b to date. The housing market’s collapse and subsequent global credit crisis helped push the US into recession at the end of 2007 and remains a critical factor to any sustainable economic recovery. Equity markets continue to be pulled around by corporate earnings releases and this will continue a pace this week with high profile reports from Exxon, Chevron, Verizon, Colgate-Palmolive and Visa. On the economic front, consumer confidence reports, Durable Goods and the first estimate of Q3 GDP will be watched closely along with investor take-up of a record weekly issuance ($123b) of Treasury notes.

JPN Data

• Wed 10.50 Retail Sales previous  -1.8% y/y expectation -1.5%
• Thu 10.50 Preliminary Industrial Production previous 1.6% m/m expectation 1.1%
• Thu 10.50 Corporate Services Price Index previous -3.5% y/y expectation -3.3%
• Fri 10.15 Manufacturing PMI previous 54.5 
• Fri 10.30 Household Spending previous 2.6% y/y expectation 1.2%
• Fri 10.30 Tokyo Core CPI previous -2.1% y/y expectation -2.0%
• Fri 10.30 National Core CPI previous -2.4% y/y expectation -2.3%
• Fri 10.30 Unemployment Rate previous 5.5% expectation 5.6%
• Fri 16.00 Housing Starts previous -38.3% y/y expectation -36.9%
• Fri 17.00 BOJ Outlook Report

Japan’s real exports (+5.4% m/m) grew in September and helped the overall trade surplus climb (520.6b) to its highest level since the collapse of Lehman Bros and the on-set of the global financial crisis. Stimulus primed exports to China were notable as Japan’s largest export market sucked in imports of cars and machinery. Year-on-year exports to China are down ‘only’ 13.8% but US demand for higher-value Japanese goods remains subdued, down 34.1%. While the country’s trade revival has driven 6 months of gains in industrial production, 30% of manufacturing capacity remains idle and fears persist that as the influence of huge government stimulus around the world is reined back export markets will contract again and compound the effects that a strong Yen is having on international competitiveness. This week CPI data will be watched for any slowdown in the deflationary cycle as well as the leading indicator of Manufacturing PMI that needs to sustain above 50 that defines expansion from contraction.

Interest rate outlook