Daily currency update courtesy of Halo financial

(Catharine Higginson) #1

Chinese August imports soared 35.2% shrinking the trade surplus marginally. This will please US policy makers who have been critical of the artificially weak Chinese Yuan exchange which favours Chinese exporters at the expense of US manufacturers.

The next story won’t surprise those of us who take some of the data releases from China will a grain of salt. The Civil Aviation Administration of China has said that around 200 pilots had been found to have falsified their resumes as airlines turn a blind eye to fake records. Some of these pilots have been allowed to continue flying after undertaking some compulsory retraining!

Risk returned to the markets yesterday after another day of positive US figures was released. Weekly jobless figures improved for the third week in a row to come in at 451k against an expected 470k. Traders were soon warned however that these numbers may have been fudged. Apparently nine states hadn’t filed their claims with the Labor Department because of the Labor Day holiday on Monday. California and Virginia estimated their numbers and the US government estimated the remaining seven. These numbers can’t be accurately relied on, but the US July trade balance can be.

In stark contrast to yesterday’s dreadful UK July trade, the US deficit narrowed by $7.1bn to -$42.8bn from -$49.9bn. This big improvement in trade bodes well for a strong US Q3 GDP growth number.

The OECD upgraded its forecast for UK GDP to +0.7% from +0.5% in Q3. This would mean UK GDP would outstrip growth in the US, Japan, Germany, France, Italy and Canada.

The collapse of South Canterbury Finance and the Christchurch earthquake are likely to deter the Reserve Bank of New Zealand from hiking interest rates to 3.25% next Thursday.

UK July August producer price inflation was softer than forecast this morning although the 20% rise in wheat prices suggests next Tuesday’s CPI may raise above July’s 3.1%.

The Bank of England left interest rates on hold at 0.50% and QE unchanged at £200bn, while the South African Reserve Bank cut interest rates to 6.00% from 6.50% as expected yesterday.

Ex-Bank of England member Willem Buiter has said in an article in this morning’s Wall Street Journal that he believes if the US Fed funds rate was negative (minus 3-4%) and then the resultant US dollar weakness could allow the US trade surplus to compensate for the slowdown in consumption. It’s hard to imagine a negative 4% interest rate, so this is more of a headline grabber.

Fortunately new week is a bit more exciting on the data front with UK and US CPI, US retail sales and the RBNZ interest rate announcement a handful of numbers which will break this week’s dearth of data.

Good news that pastor Terry Jones from the tiny hick Dove World Outreach Center in Florida has announced he will no longer be holding a burn the Koran day tomorrow on the ninth anniversary of 9/11. I guess the 50 members of his congregation will now be available to attend a more constructive event like their cousin/brother/uncle/father Billy-Bob’s hog roast BBQ instead.

Have a good weekend.

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