NZD continues to surge higher
The NZD traded a tight 20 point range in yesterday’s local session. Early yesterday saw the release of the upbeat NBNZ business confidence survey. Last night saw further USD weakness as the market considers interest rate cuts in the US; this had the NZD breaking considerably higher through barriers with highs being recorded at today’s open of 0.6780.
AUD at 19 month highs
The AUD followed the same path as the NZD with USD weakness continuing to dominate global currency moves over the last week. The yield advantage that the AUD and NZD has over the USD looks more and more impressive when markets are talking of US interest rate cuts for early next year. The AUD started yesterday at 0.7777 trading sideways throughout the day before the strong rally early this morning; reaching a high of 0.7840 this morning before easing back to 0.7834.
USD selling continues
Although the USD traded in a narrow range in our time zone yesterday the overriding sentiment was bearish; the extent of this bearishness was shown last night as the markets found numerous excuses to sell the currency further. The initial meltdown in the dollar came on the back of stop loss GBP buying, gaining momentum on the release of softer-than-expected US economic data and then selling further on the back of a swag on non-supportive comments for the USD from Swiss National Bank head Jean-Pierre Roth regarding Swiss monetary policy. The USD did recover some of its losses after Fed Chairman Bernanke stated to a group of business leaders that US core inflation was likely to moderate gradually but risks remained to the upside; this was enough to knock the currency off its highs of just over 1.3200 against the euro.
Japanese retail sales up just 0.1%yr in Oct. That compares to a 0.7% pace in Sep. Sales fell slightly in the month on poor weather.
Fed chairman Bernanke sounds inflation warning. The Fed Chairman expects the economy to get back to its potential growth rate next year. With that in mind Bernanke said "a failure of inflation to moderate as expected would be especially troublesome". Risks to the inflation outlook were largely upside, with further policy action not ruled out.
US durable goods orders plunge 8.3% in Oct. But whereas aircraft orders explained much of Sep’s 8.7% gain, soaring 198%, in Oct aircraft fell just 45%, and were only part of the weaker story. The big surprise was the 5.1% fall in core capital goods orders which suggests downside risk ahead for business investment spending.
US existing home sales rose 0.5% in Oct, their first rise in eight months, thanks to a gain in the West – all other regions were flat or down. But the rise was only modest – nothing like the cumulative 9.2% rise in new home sales recorded in August-Sept.
US consumer confidence slipped 2.2 pts to 102.9 in Nov (CB index), meaning it has now given back about half of its gasoline price fuelled Sept jump. The slippage reflected modest deterioration across most components rather than any stand-out factor.
The Richmond Fed survey showed significantly stronger readings for the region’s manufacturing, services and retail sectors in Nov.
Euroland money supply growth steady at 8.5% yr in Oct, though it remains too high for the ECB’s comfort, and the related lending data, including for mortgages and consumer credit, showed less rapid growth. So interest rates rises might be starting to have an impact.
