HiFX: Foreign Exchange Specialists

• Weekly briefings

  NZ Data

• Mon 10.45 Manufacturing Sales previous -5.1% q/q 
• Wed 10.45 Overseas Trade Index previous -1.3% q/q expectation 0.1%
• Thu 09.00 RBNZ Interest Rate Decision previous 2.5% expectation 2.5%
• Thu 09.00 RBNZ Monetary Policy Statement     
• Thu 10.30 Business NZ Manufacturing Index previous 52.0  
• Thu 10.45 Food Price Index previous 2.1% m/m 
• Fri 10.45 Retail Sales previous 0.0% m/m expectation 0.3%
• Fri 10.45 Core Retail Sales previous -1.8% m/m expectation 0.6% 

A thin diary for domestic data last week gave the market plenty of time to dwell on the fact that New Zealand is not mirroring the sharp climb back to long-run growth rates seen in Australia. The NZD fell to its weakest level since November 2000 against the AUD and with the interest gap between the two countries looking set to widen in favour of Australia in the near-term, continued weakness can be expected. This week the RBNZ will keep official rates at record lows and no change to the language of the post-decision statement is expected, with mid-2010 the stated timing of the first rate increase in the cycle. However, if housing and jobs continue to disappoint then the reality maybe that rates will remain on hold for even longer. Two releases on manufacturing and retail sales will assist the market in upgrading return to growth forecasts.

AU Data

• Tue 13.30 ANZ Job Advertisements previous -8.1% m/m 
• Tue 13.30 NAB Business Confidence previous 15  
• Wed 12.30 Westpac Consumer Sentiment previous -2.6%  
• Wed 13.30 Home Loans previous -5.5% m/m expectation 2.1%
• Thu 13.00 MI Inflation Expectations previous 3.2%  
• Thu 13.30 Employment Change previous 52.7k expectation 15.3k
• Thu 13.30 Unemployment Rate previous 5.3% expectation 5.3%
• Thu 13.30 RBA Bulletin   

Last week the RBA resumed its course of normalising rates by raising official rates by 25 basis points and again primed the market for more hikes in months to come by stating the decision was a further step to moving rates to the average; with the average over the last 15 years sitting at 5.40%, at least another 1% of monetary policy tightening can be expected over the next 12 months. The AIG series of releases gave a mixed overview of the domestic economy; Services (48.3 from 47.4) moved another step closer to the important 50 level denoting expansion, Manufacturing (53.8 from 51.0) showed good strength underpinned by mining and capital expenditure but Construction (52.8 from 57.7) slipped back as the effect of government stimulus started to wane. Retail Sales (+1.2% m/m) bounced back from a disappointing fall the previous month highlighting consumers’ capacity to cope with increasing borrowing costs. Headline Building Approvals (-7.0% m/m) disappointed but after stripping out the volatile multi-unit sector underlying new house approvals rose 0.3% m/m, with total approvals up a steep 48% y/y. This week employment data will be watched to gauge the pace of the recovery and the timing of the next rate hike.

US Data

• Wed 04.00 IBD/TIPP Economic Optimism previous 46.8 expectation 48.9
• Thu 04.00 Wholesale Inventories previous -0.8% m/m expectation 0.2%
• Thu 08.00 Federal Budget Balance previous -42.6b expectation -199.5b
• Fri 02.30 Trade Balance previous -40.2b expectation -40.8b
• Fri 02.30 Unemployment Claims previous 469k expectation 453k
• Sat 02.30 Core Retail Sales previous 0.6% m/m expectation 0.1%
• Sat 02.30 Retail Sales previous 0.5% m/m expectation -0.1%
• Sat 03.55 Preliminary UoM Consumer Sentiment previous 73.6 expectation 74.0
• Sat 03.55 Preliminary UoM Inflation Expectations previous 2.7%  
• Sat 04.00 Business Inventories previous -0.2% m/m expectation 0.2%

Non-farm Payrolls (-36k) beat market expectations and raised hopes that the US economy is poised to create jobs consistently for the first time since December 2007. The Unemployment Rate held steady at 9.7% and with the effects of the severe cold weather seen across the US in February unknown, expectations will build for a strong number in April. Better employment prospects may have filtered through to households as Consumer Credit (+5.0b m/m) registered the first increase in a year, though a sharp revision downwards to the previous month (-4.2b from -1.7b) will temper expectation that the trend has reversed. The important ISM Non-manufacturing PMI (53.0 from 50.5) consolidated in expansion territory and although the report showed some patchy growth, prospects in this sector, which provides over 80% of jobs in the US market, are improving. This week Retail Sales and Consumer Confidence will be expected to show further improvement in the underlying economic environment.

JPN Data

• Mon 12.50 Bank Lending previous -1.5% y/y 
• Mon 12.50 Current Account previous 1.10t expectation 1.25t
• Mon 12.50 M2 Money Stock previous 2.9% y/y expectation 2.8%
• Mon 18.00 Economy Watchers Sentiment previous 38.8 expectation 40.2
• Tue 18.00 Leading Indicators previous 94.3% expectation 96.9%
• Tue 19.00 Preliminary Machine Tool Orders previous 189.4% y/y 
• Wed 12.50 Core Machinery Orders previous20.1% m/m expectation -3.6%
• Wed 12.50 Corporate Goods Price Index previous -2.1% y/y expectation -1.4%
• Thu 12.50 Final GDP previous 1.1% q/q expectation 1.0%
• Thu 12.50 Final GDP Price Index previous -3.0% y/y expectation -2.9%
• Fri 17.30 Revised Industrial Production previous 2.5% m/m expectation 2.5%

Japanese companies’ Q4 Capital Spending (-17.3% y/y) fell at a slower rate than the previous quarter, indicating that the recovery from the deepest recession in decades may be gaining some traction. Recurring Profits (+102.2% y/y) also rose for the first time in 2 years and raised expectations that GDP could be revised higher this week as demand from export markets particularly in Asia underpins the recovery. Demand at home remains anaemic at best, as seen in Household Spending (+1.7% y/y) that continues to be affected by job insecurity and falling disposable income, and is largely fuelled by government incentives to buy eco-friendly cars and home appliances.. The Unemployment Rate (4.9%) did manage to dip below 5% for the first time since March 2009 but prospects for consistent job creation are doubtful while domestic demand stagnates. This week the forward looking machinery and machine tool orders releases will watched closely along with the final revision to GDP.

Interest rate outlook