Australia
Twas a quiet week on the docket for Australian economic releases. The Aussie remained robust outperforming all major currencies only dropping in value against the Canadian Dollar. Job vacancies for the 3 months to February showed solid demand, with banks supporting the view that employment will continue to improve and provide a balance for weakening housing numbers this year and running into 2020. This week’s RBA cash rate announcement and statement will be the main event with mixed opinion as to whether the RBA governor Lowe will offer up a more dovish slant than his previous comments suggest. With economic outlook looking soft the RBA are already concerned about weakening 2019 growth lowering the GDP forecast from 2.0% to 1.50%. We suggest the RBA could hint at cutting rates earlier than the November expectation markets are predicting. Friday we have Retail Sales.
New Zealand
Adrian Orr left rates unchanged at 1.75% mid last week as markets were expecting but hinted at softer domestic growth and global worries increasing potential for a rate cut towards the end of this year, some say earlier. The general feel is that drops could start as early as May with 3 cuts in total to next February. We have been at historical lows since September 2016- the average cash rate over the past 34 years going back to 1985 is 7.36%. So early 2020 we could well be looking at the overnight rate at 1.0% which would be quite an incredible outcome. The NZ Minimum wage for adults rose from $16.50 per hour to 17.70 per hour yesterday and is the biggest single increase ever. More than 200,000 are affected by the welcome rise but some say job losses could be the by-product of an unsustainable increase. With the government forecasting to have the minimum wage at $20 by 2021 expect the consumer price index (CPI) to go up as some products and services will need to increase prices. With a weakening economy this will no doubt put a strain on small-medium businesses.
United States
US equities rallied into the close of the first quarter of 2019, boosted by signs of progress in the US/China trade talks. This acted by offsetting weaker US Consumer spending data. Secretary Mnuchin said he and trade negotiator Lighthizer had finished “constructive” talks with Chinese officials in Beijing, but the negotiations were not time dependent and could still take months to complete. The recent partial US govt shutdown had an impact on Friday’s consumer spending which printed down at 0.1% from 0.3% as it comprised two months of data skewing estimates showing increased expenditure and a decrease of income March University sentiment indicator was positive improving to 98.4 from 93.8 for February. Retail Sales printed poor overnight at -0.2% from 0.3% expected showing signs that the economy has shifted gears. Crucial Non-Farm Payroll data releases Friday.
Europe
The Euro depreciated for the second straight week against the US Dollar dropping down to a yearly low of 1.1170. The EUR started the week in positive territory after German IFO survey numbers offered relief. The positive mood didn’t last long as the Euro lost ground over the remainder of the week in the wake of a worse than predicted economic slowdown sent investors buying the safe haven of the greenback. Other Eurozone data was a mixed bag also with German Retail Sales slowing to 0.9%, but this beat estimates of -1.0. Unemployment claims fell by 7,000 just shy of the estimated 10,000 while unemployment fell to 4.9% from 5.0%. The predictions for headline inflation is expected to be downgraded to 1.6% in 2021 as the Eurozone weakens further. We have a fairly uneventful economic calendar this week with only ECB monetary policy meeting accounts Friday.
United Kingdom
The British parliament have again rejected Theresa May’s Brexit deal for a third time by 344 to 286 votes. This comes on the day that the UK were originally set to leave the EU. Her deal has again been turned down in a painful series of events leading up to this point. I said this last week and I need to say it again- a large number of MP’s for and against her deal have come out saying they would back her deal if she was to resign. This proves the system is based on who owns the power and not on a robust system of principles. These MP’s don’t care about the good of the UK folk, they are in it for themselves and reasons by a means of pushing their own agenda based on opportunity and convenience at the detriment of Brexit. At the moment the UK is left in an awkward position of not knowing how or when the UK will leave the European Union. The Pound has come under new pressured this week dropping back to around 1.3030 against the US Dollar. This week I suspect we can expect more of the same with volatility.
Japan
Japan’s unemployment rate dropped by a decent 0.2% lower than the expected 2.5% to 2.3% Friday. This is the lowest jobless rate since September 2018. The Japanese yen struggled over the week against the main currencies as investors purchasing riskier style assets as mood sentiment improved. Monday’s Tanken report, a measure of Japan’s manufacturing industry, deteriorated by more than expected in the three months to March 31st. The survey highlighted a weaker manufacturing sector as concerns are still grave over the global economic outlook. Tsuyoshi Eeno an economist at the Neuro Leadership Institute has suggested that after trade negotiations between the US and China come to an agreement Japan will more than likely be the US’s next target which is creating a haze of uncertainty in the industry. The Japanese Yen has lost ground this week as investors head into risk assets, against the US Dollar the currency is trading at a 111.40 as the US dollar takes charge.
Canada
Data published Saturday morning showed the Canadian economy grew in January, improving on market expectations and negating earlier poor reports from late last year. GDP printed at 0.3% based on forecasts of 0.1%. This rallied the Canadian Dollar across the board earning it the best performer of the week. The OPEC agreement to limit production has had a stabalising impact on the rising Crude Oil prices and the CAD. Sanctions on Venezuelan and Iranian exports have reduced supply and sent prices through 60.00. Venezuelan exports of crude are expected to rise this week after an electricity failure caused it to shutdown production last week of its largest export terminal. That said we should see lower prices this week and the Canadian Dollar return to 1.3400 against the big dollar. Unemployment figures print Saturday with unemployment expected to stay at 5.8%
Major Announcements last week:
• US Consumer Confidence prints down at 124.1 from 132.1 expected
• RBNZ rate announcement remains unchanged at 1.75% but stance changes to dovish
• Brexit voting highlights no end in sight
• UK current Account prints at -23.7B from -22.9B markets were expecting
• Canadian monthly GDP remains stable at 0.3% from 0.1% predicted