NZD breaks 0.6800
Wednesday’s local session opened with the NZD smashing through barriers to new highs of 0.6825, the highest since Feb. The NZD eased back from the highs and hovered for the rest of the day, only trading a range of 0.6775-0.6801 overnight. Yesterday’s release of Oct dwelling consents came in at -1.9% for the month which now equates to 25% growth for the year. Apartment consents fell but not as much as had been expected. The NZD opens this morning around 0.6785.
Growing deficit fails to holt AUD climb
The AUD has remained buoyant rising to new highs of 0.7845 in the local session and then a high of 0.7855 overnight. Yesterday’s data releases couldn’t damage the AUD with the Australian trade deficit increasing to $1,263m in October. However the breakdown shows that exports rose 2.1% and the main driver goods imports rose 5.6% suggesting strengthening retail growth leading into Christmas. Australian construction work done fell by 2.1% in Q3 but has increased 3.6% for the year. The AUD opens this morning at 0.7835.
USD weakens amid concerns from French officials
The USD finally found some respite yesterday following a report which suggested faster US economic growth than had been previously expected. Numerous warnings from various European officials also helped dampen recent sentiment after the euro again failed to break and hold above 1.3200 against the USD. Comments included that of French Prime Minister Dominique de Villepin who stated that the euro’s recent rise was weighing on competitiveness, and French Finance Minister Thierry Breton who stated that strong movements in currencies are never good. Meanwhile, data released showed GDP for Q3 grew 2.2% against the initial 1.6% estimate and the markets estimate of a 1.8% rise.
Japanese industrial production rose an unexpectedly strong 1.6% in Oct. That compares to a consensus expectation of a -0.5% decline. Short term production plans are also strong, implying a robust cumulative gain over the next two months.
US GDP growth revised up from 1.6% to 2.2% in Q3. GDP growth was revised up more than expected in Q3 although the components driving the revisions – inventories and net exports – were no surprise given the monthly data we saw subsequent to the advance GDP report. Elsewhere, revisions were minor, and slightly to the downside, hence the slightly lower estimate of 2.1% for domestic final sales. In other words, stronger GDP growth did not reflect stronger domestic spending.
US new home sales down 3.2% in Oct. Sales did not fall as much as the 6% drop we forecast, but because of significant downward revisions to prior months, the monthly annualised pace of sales in Oct, at 1004k, was actually slightly below our 1010k forecast, and much weaker than the consensus 1050k. The revisions remove some but not all of the outperformance of this series relative to the plunge in new home starts.
US Fed Beige Book indicates moderate growth. The overall assessment was that growth was moderate, though with softness generally concentrated in housing and auto-related sectors. House sales were much weaker in most districts and house prices were falling in some areas. The labour market remained tight with skill shortages in some sectors yet wage growth remained moderate. Prices of construction and energy products were falling in some areas. In all, consistent with the Fed remaining on hold for some time.
The Canadian current account surplus was larger than expected at C$5.1bn in Q3, thanks to a lower deficit on the investment balance offsetting the narrower trade surplus.
UK consumer credit growth picked up further in Oct and mortgage lending is roaring ahead, backing evidence elsewhere of a faster pace of house price acceleration. The case against a further BoE rate rise early next year is diminishing!
