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The global dairy auctions concluded this week with the Index showing a rise of 0.5% for overall prices. While the Whole Milk price came in flat analysts are predicting a rise this season in the prices paid to farmers. Fonterra’s forecast is a wide range of $6.25 to $7.25 per solid, while bank forecasts are narrower at this stage in the season ranging from BNZ at $6.70 to ANZ $7.15. Prices are subject to what happens in the China/US trade war and how this affects Chinese demand. NZ Inflation for the September quarter rose 0.7% from the 0.6% markets were predicting Wednesday bringing buyers of NZD back to the table. overall consumer prices gained 1.5% from the previous year but was slower than the second quarter price of 1.4%. This data may support the argument for another cut in the 13 November RBNZ policy meeting.
Worrying signs this week for the UK economy when the unemployment rate climbed to 3.9% from 3.8% and inflation down at 1.7% for the year to September, unchanged from August but lower than the 2.1% in July showing an overall declining trend shaping.
The Brexit carnage continues this week with surprising headlines suggesting a deal may not be far away. In the early hours this morning, the UK and the EU look to have struck a revised deal after an intense few hours of negotiations. He now needs to secure parliamentary support to get the deal formally agreed. As per previous voting this is likely to be an uphill battle, but Johnson has said he is confident. The British Pound has broadly pushed higher this week, extending its gains from last week’s rally on positive headlines. We suggest this highest two-day spike in over a decade against the US Dollar to 1.2970 could all be for nothing if markets have “bought the rumour”. Against the kiwi the pound has climbed to 2.0540 (0.4868) during early Thursday trading the lowest price seen in the pair since the day of the Brexit referendum.
US Retail Sales fall short of expectations printing at -0.3% from the 0.3% predicted surprising markets and raising questions around overall strength in the US economy and if the Fed may cut interest rates again at the late October Fed meeting.
The international Monetary Fund has reported that world growth is the slowest since the 2008 Financial crisis. With interest rates low this is enticing more financial risk taking with institutions and Hedge Funds able to maximise government/bank resources and finances to maximise positions. The IMF said this could be a ticking time bomb on global stability and risks to the outlook. The fear of the IMF is the general economic outlook, with interest rates at very low levels this gives limited options to central banks to handle further downturns.
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