- UK interest rates forecast to rise
- US elections dominate USD thinking
- US trade gap eagerly awaited
It only seems fitting that a
lame duck President should blame a guy called Donald for his election
failure but, as Mr Rumsfeld departs, perhaps the geedubya might
consider making the odd speech about something other than ‘Terrrrists’.
And on the football front, surely if James McFadden takes anything away
from his sending off, it should be to keep his mouth shut. Whether the
Ref is right or wrong, he should be treated with a bit of respect, a la
rugby if I may be so bold. As for the markets, other than the
Republican’s drubbing (a word only used at election times), the news is
all about today’s Bank of England interest rate decision and the raft
of US data we will get access to this afternoon. Exchange rates have
been flipping boring in the last few days as the US news was absorbed
and now traders are so overwhelmingly convinced that mortgages will
cost more before the sun goes down, that Sterling is as flat as a
pancake
this morning. So, a decision to leave the UK base rate at 4.75
percent would be a shock – horror moment for the markets. It would be
akin to expecting a puppy for Christmas and getting a rat, as far as
traders are concerned and Sterling would be hammered. However, if the
BoE does as the markets wish, we should see little movement other than
perhaps a slight slide in the value of the Pound. This afternoon’s US
data is covered below and last night’s new Zealand data is covered in
the migration section. Have a great Thursday and if you call in to this
office today, don’t be at all surprised to hear revision on current
events in the background; most of us are off to a quiz night later and
we need all the hep we can get. Wish us luck.
The New Zealand Dollar is a
tad weaker this morning after a arise in Kiwi unemployment was
announced last night. The spike from 3.6 to 3.8 percent goes against
the recent decline in unemployment levels and will probably be greeted
with a discreet sigh by the Reserve Bank of New Zealand who are
desperately worried about the burgeoning wage price inflation and
higher housing and retail activity. Obviously, fewer people in work
lessens the wage price pressure a tad and reduces spending capacity and
whilst it is a cynical thing to look at the plight of individuals who
find themselves out of work in these terms, it is a fact that the RBNZ
will want to see some signs of a slowdown. The weaker employment number
weakened the Kiwi Dollar for all the reasons above and the star the day
with GBPNZD pressing the upper reaches of its recent downward trend. Be
wary of thinking that the trends is broken just yet though as this is
the only piece of poor data out from the NZ economy recently and at 7.25
percent, the NZ interest rate yield is still hugely attractive, even if
the UK interest rate is raised to 5.0 percent today. This may be just
the opportunity that NZ Dollar buyers have been waiting for.
The US Dollar is being
buffeted by election news and forecasts for US interest rates. Unless
you are spending a week in a flotation tank, you will be all too aware
of the changes in the Senate and Congress and very aware that the
President has virtually no power other than to wreck other people’s
plans now. It’ll be a long two years for Mrs Bush’s little boy but, hey
– he’s rich, he’s still being paid so he probably doesn’t care.
However, this afternoon will bring forth a whole heap of US data and
most of it is expected to be rather good news for the US economy. The
fall in energy prices will have helped the cost of imports and that
should reduce the US trade deficit. Wholesale inventories are expected
to have reduced a little allowing more capacity for growth and
production output and the jobless claims numbers are forecast to show a
small fall in the number of new applicants. The day should be topped
off with an
almost unchanged level of consumer sentiment as measured by the
University of Michigan. Now, if this all comes in as expected, why
would the US Dollar not strengthen?
Give to us clear vision that
we may know where to stand and what to stand for - because unless we
stand for something, we shall fall for anything.
Peter Marshall
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
|
