Trading Economic News - Page 39

John Rivera · #**571** (**permalink**) 07-06-2009, 11:25 AM

Quote:

Originally Posted by TradingAngel

Hi All,
I have been following the NZ $ with a view to more trades, but since studying the details of the NZ economy thoroughly, I am now mystified at the rise of the NZ $ against the US and the other main currencies. Apart from one month's trade surplus, all the figures and stats for NZ are negative. The indebtedness of the nation is massive......the 4 million population owe 160 billion.... one third of the Government Budget is "social welfare", amounting almost to the total of the individual tax take.....The Govt has to borrow an additional 8-9 billion to run this year...The 1st quarter GDP dropped one whole percent (4% annualized!!)...
The country suffers from a rather poor infrastructure, especially involving telecommunications.... The country depends on a very narrow range of products and services for it's survival......And to top it off, it's workforce is rated as one of the most inefficient in the OECD. After learning all that, I have remained cautious and left it, yet the NZ $ stays strong....
Any words of wisdom?
Ciao

The interest rate in New Zealand is still one of the highest and when demand for risky assets is strong the currency will benefit from the carry trade. Additionally, commodity prices were soaring and as the main export for the country, it will always raise the growth outlook for its economy. However, we could see a significant pull back in prices and a pick up in risk aversion as traders start to come to the realization that any recovery will be protracted which could sink the "kiwi".

John Rivera · #**572** (**permalink**) 07-06-2009, 11:31 AM

On that note watch for the upcoming RBA rate decision to see if the if they lower their benchmark rate. Forecasts are for a hold so a rate cut could sink the Australian dollar and the other Commodity driven currencies. A RBA rate hold and an accompanying dovish statement would also increase downside risks for the currency.

Sofia.forex · #**573** (**permalink**) 07-07-2009, 07:22 AM

On Wednesday, the ADP (remember, the payroll service) came out showing that they had dropped over 470,000 jobs from their weekly rosters, which means 470,000 people were no longer getting paychecks. But Forex analysts don’t take this seriously because it does not suit their interests, they only look at the hard data.

Well, the hard data came out on Thursday from the US government and guess what? 467,000 jobs were lost when the street was calling for 360,000 – over 100,000 jobs more than anticipated were dropped. But here is another lesson for you – and perhaps you can profit from this as well.

The US unemployment figures released last week do NOT include those who are no longer getting unemployment checks (In the US you get benefits for several months and then it stops), it does not include those who got part-time jobs (which is called under-employment as the money they make is not enough to sustain themselves – but they do not qualify for federal benefits) and it does not include those who were recently laid off (by my count there was at least 38,000 in the second half of June from the Auto dealers and manufacturers) as it takes three weeks to process these claims.

John Rivera · #**574** (**permalink**) 07-07-2009, 10:49 AM

Quote:

Originally Posted by Sofia.forex

On Wednesday, the ADP (remember, the payroll service) came out showing that they had dropped over 470,000 jobs from their weekly rosters, which means 470,000 people were no longer getting paychecks. But Forex analysts don’t take this seriously because it does not suit their interests, they only look at the hard data.

Well, the hard data came out on Thursday from the US government and guess what? 467,000 jobs were lost when the street was calling for 360,000 – over 100,000 jobs more than anticipated were dropped. But here is another lesson for you – and perhaps you can profit from this as well.

The US unemployment figures released last week do NOT include those who are no longer getting unemployment checks (In the US you get benefits for several months and then it stops), it does not include those who got part-time jobs (which is called under-employment as the money they make is not enough to sustain themselves – but they do not qualify for federal benefits) and it does not include those who were recently laid off (by my count there was at least 38,000 in the second half of June from the Auto dealers and manufacturers) as it takes three weeks to process these claims.

You definitely need to look beyond the employment figures, you must also take into account the methodology which employs some survey estimates and a benchmark that leads to revisions. Additionally, the majority of undocumented workers aren't accounted. As for the difference in the ADP figures, it measures private employment and if we saw a significant increase in government jobs which was expected to happen with the stimulus plan, then the numbers could be significantly different. ADP has changed their methodology to mirror the NFP reports which has made it a more accurate predictor.

John Rivera · #**575** (**permalink**) 07-10-2009, 11:34 AM

Canadian employment figures surprised today with only losing 7,400 jobs as self employment and part-time opportunities rose. However, we still saw weakness in the manufacturing sector which would need to turn around for the economy to gain traction. Nevertheless, the positive trend and wage growth rising to 3.5% could keep the BoC from initiating the QE framework that it developed and provide "loonie" support.

John Rivera · #**576** (**permalink**) 07-13-2009, 12:34 PM

U.S. Retail sales are expected to show a modest gain as consumer start to increase their purchases of non-discretionary items. However, we may see the release overshadowed by the Goldman Sachs earnings report. An analyst upgrade on the stock today is providing support for equities and if we see strong results we should see a similar reaction tomorrow. Therefore, we could see dollar and yen weakness with the Euro and commodity dollars benefiting.

John Rivera · #**577** (**permalink**) 07-14-2009, 10:11 AM

Although we saw a rise in U.S. retail sales much of the gain was from a rise in gasoline prices and automobile sales on the back of discounting and government incentives. Neither is hardly anything to get excited about. Additionally, we are seeing a declining trend for sales ex gas and cars which doesn't bode well for the broader economy. Meanwhile, PPI was stringer than expected as higher gasoline prices are filtering through and shrinking margins. If companies can't pass on these costs to consumer then they will see their margins continue to shrink and which will start to impact earnings as the impact of cost cutting measures fade.

TradingAngel · #**578** (**permalink**) 07-14-2009, 07:57 PM

Quote:

Originally Posted by John Rivera

The interest rate in New Zealand is still one of the highest and when demand for risky assets is strong the currency will benefit from the carry trade. Additionally, commodity prices were soaring and as the main export for the country, it will always raise the growth outlook for its economy. However, we could see a significant pull back in prices and a pick up in risk aversion as traders start to come to the realization that any recovery will be protracted which could sink the "kiwi".

Thanks John for your trouble to react. I appreciate it.
I have had an operation, and after I had to be away, hence the delay in responding.

I agree totally with what you said. However, commodity prices have dropped since by quite a lot, and yet......... In addition, yesterday, Mr Bollard, the CEO of the Reserve Bank of NZ made a rather curious statement that asserted "that NZ would lead the rest of the world out of this recession; or at least, be the first to emerge from it......" He further said, that it would be export led, but that the NZ$ dollar would need to drop substantially to facilitate that. My problem with this is twofold: A. On what does he base this, as all the economic Data out of NZ is fairly negative to say the least. So, in what way is NZ going to be the avant garde of recovery...? It just does not seem plausible..... B. By making such a statement, surely He must have known that this would only push up the Kiwi $ dollar!! So, either there is an agenda there or he is not very smart. I believe that since there are a lot of Japanese "Ubidashi" NZ$ investments due for renewal, the former could well be the case.......... Certainly, the way the NZ economy is doing, there is no way that they will lead the rest of the world out of this. I would like to hear your view on this. Thanks. Regards, Angel.

John Rivera · #**579** (**permalink**) 07-17-2009, 12:16 PM

Quote:

Originally Posted by TradingAngel

Thanks John for your trouble to react. I appreciate it.
I have had an operation, and after I had to be away, hence the delay in responding.

I agree totally with what you said. However, commodity prices have dropped since by quite a lot, and yet......... In addition, yesterday, Mr Bollard, the CEO of the Reserve Bank of NZ made a rather curious statement that asserted "that NZ would lead the rest of the world out of this recession; or at least, be the first to emerge from it......" He further said, that it would be export led, but that the NZ$ dollar would need to drop substantially to facilitate that. My problem with this is twofold: A. On what does he base this, as all the economic Data out of NZ is fairly negative to say the least. So, in what way is NZ going to be the avant garde of recovery...? It just does not seem plausible..... B. By making such a statement, surely He must have known that this would only push up the Kiwi $ dollar!! So, either there is an agenda there or he is not very smart. I believe that since there are a lot of Japanese "Ubidashi" NZ$ investments due for renewal, the former could well be the case.......... Certainly, the way the NZ economy is doing, there is no way that they will lead the rest of the world out of this. I would like to hear your view on this. Thanks. Regards, Angel.

Well, many feel that China will lead us out of this downturn and if you think that, then the expected increase in domestic Chinese growth could lead to more demand for New Zealand exports making a case that they would be a leader as well. I think the economy is too small to be able to lead a global recovery, but strength from the region could be a leading indicator for the broader economy. They don't have the banking issues like the U.S. and U.K., but as long as the outlook is positive then I don't see the Kiwi weakening. However, if we see another dip in economic activity which leads to a drop in risk appetite, the kiwi could weaken and when the ultimate recovery happens the country would be in position to reap the benefits and could be the first to post positive growth results.

Hairbee · #**580** (**permalink**) 07-18-2009, 04:19 AM

Hi John,
Most currencies are trading in a tight range now.
If CIT declares bankruptry, do you think it will be the catalyst for a breakout??

Thanks!!

John Rivera · #**581** (**permalink**) 07-21-2009, 10:00 AM

Quote:

Originally Posted by Hairbee

Hi John,
Most currencies are trading in a tight range now.
If CIT declares bankruptry, do you think it will be the catalyst for a breakout??

Thanks!!

We have seen CIT put a plug in the hole in its sinking ship. Although I don't beleive this story is over markets have looked beyond it to focus on earnings.If it did declare bankruptcy it wouldn't have the impact to shake currencies from their current range but it could lead to more job losses which could limit risk appetite in the future.

John Rivera · #**582** (**permalink**) 07-22-2009, 11:05 AM

U.K. retail sales are due out tomorrow and an improvement of 0.3% is expected following a 0.6% decline the month prior. We are seeing unexpected bullish sterling sentiment at the moment despite equities trading flat. The BoE minutes today were somewhat optimistic but left the door open for further quantitative easing. However, it appears that the will try and asses the impact of their current efforts before despite speculation that they will look take their cue from the quarterly inflation report.

John Rivera · #**583** (**permalink**) 07-23-2009, 12:42 PM

We saw positive UK retail sales, higher US existing home sales and better than expected earnings spur on risk appetite. Tomorrow's calendar could derail current sentiment or bolster it further. U.K. 2Q GDP is the headline release ion the day with expectations of a 0.3% decline in growth following last quarter's 2.4% contraction. A better than expected reading could signal an end to the country's recession and may send the pound soaring. EZ PMI and German IFO will cross the wires before hand and both are expected to show improvement which could generate Euro support.

John Rivera · #**584** (**permalink**) 07-28-2009, 11:47 AM

We are seeing equities sell off and the dollar find support on the drop in consumer confidence. Rising unemployment continues to be a concern as it could limit the scope of a recovery. Tomorrow's expected decline in durable goods orders could add to the bullish dollar sentiment. Also, watch out for U.K. mortgage approvals as a decline in lending could raise concerns add add to current sterling weakness.

John Rivera · #**585** (**permalink**) 07-29-2009, 10:41 AM

U.S. durable goods fell 2.5% which was more than expected but a 1.1% increase in orders ex transportation took markets by surprise. A 38.5% drop in non-defense airplane orders led the headline lower masking strength in machinery and primary metals which are bullish signs for future growth. US GDP will now be the focus for the dollar on Friday and if we see personal consumption numbers improve then we could see a another bout of risk appetite. However, a decline as expected could build upon the negative sentiment generated by the fall in consumer confidence.