This week the FX markets were quiet drained around the United States Thanks-Giving holiday. We saw little less Liquidity and volume in that regard. There was economical data from the New Zealand this past week, although most being low impact news.
Core Retail Sales QoQ
Retail spending continued to push higher in the September quarter, with a 0.9% gain in overall sales volumes. Even though spending was up by a modest 0.3%, this still shows a firm underlying picture of spending in the economy. Note that spending continues to be supported by low interest rates, strong population growth, and increased levels of tourist arrivals.
Trade Balance MoM & YoY (Oct)
As an export dependent economy, New Zealand has been seeing a decline in trade balance over the past couple of months.An exporting country like New Zealand would always want to see a rising trade balance because that simply means that they could buy more imports with the same amount of exports. So therefore, with a declining trade balance, New Zealand has to pay more for imports because the exports that keep their economy healthy are failing in relative to the price of imports they need to buy.
We saw a Trade deficit of $846m for October, even though the figure higher was than expected. This comes in following a $1.394m deficit in September.
The kiwi has been performing relatively well against the Euro. It continued it’s strength into this past week. The markets continue to price in no ECB rate cut this year, with a 0% chance of a rate hike next month. If ECB President, Draghi, does offer insight into the ECB’s next steps, we will be focused on hearing what they intend to do with their capital key and deposit threshold requirements. All that I know now is that it is looking for ways in which it can lend out most of its debt to prevent a freeze in its 5.5 trillion euro short-term funding market which underpins its financial system.
The Aussie dollar made up for much of last week’s losses. We did not have much economic data coming from Australia this week, apart from a disappointing ‘Construction Work Done’ figures and a speech the two assistant governors. In His speech he stated that the unemployment rate, which has declined over the past year by more than expected, is likely to edge just a little lower over the next two years. That implies that there will be some spare capacity in the labor market for a time.
With low inflation, the RBA expects underlying inflation to remain around 1½ per cent for a few quarters before gradually increasing to more normal levels
The yens continued to be the worst performing currency this week. Japanese Yen look to the Bank of Japan to guide near-term moves in the Yen, and this is especially true as the recent global bond market sell-off has pushed Japanese Government Bond yields to the BoJ’s stated ceilings. In September BoJ Governor Haruhiko Kuroda and his staff announced the bank would purchase unlimited amounts of JGB’s in order to control rates.