Eurozone disagrees on (unannounced) bond plans
UK public borrowing data could boost sterling
Australasian interest rates on hold for quite a while
FX Market Overview
Monday was quiet. There was a lack of data but plenty of comment and yet traders sat on their hands ahead of today’s UK data and a week of interesting morsels from elsewhere.
Yesterday’s main talking point was the, as yet unannounced ECB bond buying plan which is designed (so we hear) to stabilise interest rates in Europe, especially in Spain and Greece where bond yields are at unsustainable levels. All of this is speculation because the ECB and EU leaders have been keen to distance themselves from all the speculation and the Bundesbank has voiced outright hostility towards such a plan.
We may hear more today but if we don’t, we will still have a smattering of UK data to reinvigorate jaded traders. That data includes public sector debt levels; a set of data that will be closely watched for any signs that the Chancellor’s targets are even remotely achievable. We will also get an industrial trends survey from the Confederation of British Industry which we expect will be fairly flat. Traders are much more interested in whether Friday’s 2nd revision to the UK GDP data gives us a slightly less severe downturn than the 0.7% we saw in the 1st estimate. Many believe it will be revised up to a minus 0.5% figure and that Sterling has stabilised in anticipation of that.
The minutes from the last Reserve Bank of Australia interest rate setting meeting were released overnight and the bottom line is that Australian interest rates are on hold and may be heading for a cut in the months ahead. The government is boosting mining production but the slowdown in commodity prices has resulted in a number of mining projects being delayed or shelved as mining companies adjust to lower income. That income drop is partially due to a slowdown in China and partially due to excessive strength of the Australian Dollar. If the Aussie government wants to boost the economy, it should be seeking measures to weaken the AUD and an interest rate cut would certainly help in that regard.
Across the Tasman Sea, interest rates are also on hold and a report on inflation expectations produced the 5th consecutive quarterly drop in inflation forecasts and the lowest reading since 2009. An expected 2.3% in Q3 means the pressure is certainly off for any interest rate cut from the Reserve Bank of New Zealand and that tends to strengthen the NZ Dollar. However, events in China and Europe are weighing on the Australasian Dollars so things are fairly balanced as far as Kiwi Dollar strength is concerned.
And finally, I think American women missed a trick yesterday. Augusta National Golf Club admitted women members for the first time in its 80 year history yesterday. We were supposed to be impressed at how progressive that is but it is pretty pathetic really isn’t it. Women were entitled to vote in America in 1918 after all. But I think that rather than telling everyone “I am delighted and honoured to be a member of Augusta National Golf Club”, Condoleezza Rice should have very publicly declined their offer. Why would you want to be a member of an organisation which wants to be applauded for emerging from the dark ages 100 years after everyone else?
"I have never been able to find out precisely what feminism is. I only know that people call me a feminist whenever I express sentiments that differentiate me from a doormat,”
Rebecca West, 1913.