The Reserve Bank of New Zealand left interest rates unchanged at 3.00% overnight. The accompanying statement from the Governor Alan Bollard was more dovish than expected as he cited a weaker outlook since the June Statement. Further rate increases will be “more moderate” than previously projected. The NZD has appreciated due to the higher GDP outlook from additional growth generated from the reconstruction of Christchurch. Bollard said the Bank would look through the temporary impact on inflation due to construction costs.
The Euro is higher despite poor September German ZEW economic expectations and flat July Eurozone industrial production on Tuesday. Global stock markets are up between 7 and 10% in September, so risk appetite is up and that means a higher Euro. Personally I think both the stock markets and Euro are on borrowed time and expect these to be pared back from next week.
After selling a reported 1 trillion Yen yesterday, the Japanese Ministry of Finance have backed off further intervention for now. USDJPY rose quickly to the first major resistance level of 85.77 before coming to a screaming halt. Technically USDJPY is still in a downtrend so without further intervention and a subsequent break of resistance at 85.77, it is heading toward 80.00 again.
UK retail sales data this morning was much weaker than we were hoping for. The market consensus was for a rise of +0.3% in August. The -0.5% fall showed that the 3 previous consecutive monthly rises were well and truly over. Is the resilience of the UK consumer spending on the High Street over?
The Bank of England (BOE) may think inflation will drop back in line with target next year, but the general public clearly doesn’t. The release of the BOE Q3 Inflation attitudes survey this morning showed that the public expect inflation to go from 3.3% to 3.4% over the next 12-months.
We get a plethora of important US data releases from 13:30pm this afternoon. Expect volatile trading conditions for the remainder of this week.
cat (Catharine Higginson) #1