4x Profit Maker

It’s likely that the RBNZ will stand on the sideline for most of this year. Without much change in monetary policy, the movement of New Zealand dollar will be more dependent on external factors including the US fiscal consolidation and sovereign debt problems in the Eurozone. Should the RBNZ adjust its monetary policy, it would likely be a rate hike as policymakers have to normalize its ‘emergency’ policy setting. This compares with a potential rate cut from the RBA. Against this backdrop, we expect NZD to outperform AUD this year. Domestic economic developments have shown downside risks since late last year. GDP grew +0.8% q/q in 3Q11, following a +0.1% rise in the prior quarter, as driven by the Rugby World Cup visitor spending and agricultural manufacturing production. However, recent indicators … Read entire article »

Euro is mildly lower as the week starts as focus turned from economic data back to the situation in Greece. A pressing concern is the agreement on Troika’s term for austerity. Greek coalition leaders failed to agree on the details of the terms demanded by international creditors after a five hour meeting with Prime Minister Papademos on Sunday. It’s reported that while the principles to cut spending in 2012 by 1.5% of GDP, or EUR 3.3b, was agreed, the three party leaders’ view on details differed. And there are two big issues left, labour and banks. Papademos then met with troika later on Sunday together with Finance Minister Venizelos and Labor Minister Koutroumanis. Now, the situation is, the three party leaders are required to give their first response to proposed … Read entire article »

We expect the RBA will reduce its cash rate by -25 bps to 4.0% at the February meeting. This third consecutive rate cut since November would bring the country’s monetary policy to mildly accommodative from neutral. Given high uncertainty in global economic outlook and weaker tone in recent domestic developments (rising unemployment, benign inflation and appreciation in AUD), we believe a rate cut is justified. The RBA will release its quarterly Statement on Monetary Policy and policymakers should use this opportunity to communicate more about its rationale of the new policy settings. At the December meeting, the RBA cited moderation in global economy, the dire situation in the Eurozone and softened domestic economic situation as reasons for the rate cut. These factors appeared to have deteriorated further since that meeting. Although … Read entire article »

Risk markets’ pull back was rather shallow last week with help of solid global economic data and indeed, major equity indices finally resumed recent rise after much stronger than expected employment data from US. While DOW is still limited by an intraday high made last year at 12876, the close of 12862 on Friday was the strongest close since May 2008. UK FTSE 100 hit six month high of 5901 before closing near to this level while German DAX also closed at six month high of 6766. Commodity markets were mixed. Gold pared much of the week’s gain on Friday while Crude oil regained some ground following stocks. CRB commodity index jumped to close the week on 314 level. In the currency markets, dollar was mixed as it was bounded … Read entire article »

Non-farm payroll report showed much larger than expected expansion in US job market by 243k in January, versus consensus of 150k. That’s the beset number in nine months and even better than December’s impressive 203k, revised up from 200k. Unemployment rate dropped again for the fifth straight month to 8.3%, lowest in three years. In spite of the strong data, dollar is mixed, staying in range against European majors, up against yen. The upcoming US session will be interesting in deciding whether risk rally would take off again, in particular in whether DOW could take out 12876 high decisively, and take commodity currencies higher with it. Employment data from Canada was disappointing. The economy added just 2.3k jobs in January, comparing to expectation of 24.5k. Unemployment rate rose to 7.6%, … Read entire article »

By: Barbara Zigah In Asian trade, commodity-linked currencies fell on news that China’s non-manufacturing PMI slipped to 52.9 last month from December’s reading of 56.0. On the news the Euro and the Aussie Dollar moved lower; as reported at 12:29 p.m. (JST) in Tokyo, the Euro traded at $1.3114, striking an intraday low, while the Australian Dollar slipped against the U.S. Dollar to $1.0675, a decline of 0.2%. The HSBC Services PMI also showed that new orders for January rose at a steady pace which helped to stem the slide. Both currencies have since recouped and the EUR/USD is now trading at $1.3138 while AUD/USD is trading at $1.0685. Analysts say that the mixed data out of China doesn’t offer too many reasons for optimism and traders will be hard-pressed to move … Read entire article »

Canada will by no means escape from the recent global economic turmoil. As an economy heavily reliant on exports, the sovereign debt crisis in the Eurozone and the stringent fiscal consolidation to be adopted by the US are expected to hurt Canadian economy. Weakening economic outlook will probably trigger the BOC to lower interest rates later in the year. However, on the whole, we continue to believe that higher commodity prices and Fed’s QE3 would drive CAD higher later in the year. The latest report showed that Canada’s GDP growth surprisingly dropped -0.1% in November, following a flat reading in October, due to a -2.5% decline in oil and gas extraction. This should probably be a seasonal factor as the fall in extraction was driven by plant maintenance. A rebound in … Read entire article »

Markets are trading in tight range as traders await the employment data from US today. Economist expect the data to show 150k job growth in January, down from December’s 200k. Unemployment rate is expected to be unchanged at 8.5%. Looking at the leading indicators. ADP employment showed 170k growth in private sector, down from December’s 292k. Employment component of ISM manufacturing dropped slightly from 54.8 to 54.3 in January. 4 week moving average of initial claims was largely unchanged at 376k. Conference Board consumer confidence dropped from 64.8 to 61.1 in January. Hence, the overall picture is inline with the view that job growth has moderated slightly in January. We’d like to point out again that DOW has being struggling in range below 12876 key resistance (last year’s high) this … Read entire article »

Euro failed to break through this week’s high of 1.3233 against dollar as consolidations extend. Markets are getting cautious ahead of tomorrow’s job data. Meanwhile, investors’ are disappointed by the lack of progress in Greece debt swap deal. In addition, the common currency is weighed down by comments from Luxembourg Prime Minster Juncker, who’s also the leader of Eurozone finance ministers. Juncker firstly noted that the debt crisis measures adopted in the last summit were “largely insufficient”. Juncker urged EU leaders to take further steps in the next summit in March. Meanwhile, he also said that debt swap talks with Greece were very “ultra difficult”. Spain sold EUR 4.56b of bonds today, above it’s maximum target of EUR 4.5b. That include EUR 2.5b of three year bonds at average yield … Read entire article »

By: Barbara Zigah The Euro moved higher against the U.S. Dollar as risk appetite improved following a run of better than expected global PMI data which helped to alleviate investors’ fears of global growth worries. Global purchasing managers’ indices from Germany, China, U.K., the U.S. and the Eurozone which broke above the 50 threshold, offered the Euro a bounce yesterday, and gave investors some hope that the tide might be turning. That helped to push the Australian Dollar higher as well against the greenback, touching on a 5-month peak in Asian trade. As reported at 12:07 p.m. (JST) in Tokyo, the Euro edged up 0.2% tp $1.3183 and well off yesterday’s low of $1.3026. The Australian Dollar was also up 0.2% from late N.Y. trade and most recently was trading at $1.0758. … Read entire article »