Professional Documents
Culture Documents
Weekly Sentiment Paper: Distributed By: One Financial Written By: Andrei Wogen
Weekly Sentiment Paper: Distributed By: One Financial Written By: Andrei Wogen
Australian Dollar!
Japanese Yen!
British Pound!
11
Canadian Dollar!
12
13
Australian Dollar
Overall Picture and Its Tone
Overall the Australian is weak economically. The weak points continue to be weak mining
sector and the employment sector while the consumer also remains weak and feels weak as
both retail sales and consumer sentiment have been lower respectively. As for the business
sector, manufacturing and services sectors continue to weaken as does business sentiment.
Politically speaking, the country is doing well but recent budget problems have caused the
government to cut down on spending and adjust policy in order to keep debt from rising too
much. This action has also caused consumer sentiment to weaken and there is likely more cuts
on the way as the mining industry continues to slow. Another thing that has caused some worry
from the government is the strong housing market. Prices continue to rise which is helping to
support consumers some but has caused the government to voice their disproval of these high
prices worrying about a bubble forming. As for the central bank they continue to remain neutral
to slightly dovish while continuing to keep rates at historical levels. They continue to say that
rates are the right level to foster growth and investment but they also continue to verbally talk
down the Australian Dollar which they say is too high. Still no actual intervention though.yet.
Overall then the tone of Australia is neutral to slightly negative
. Overall Sentiment of the Australian Dollar
As for the overall sentiment towards the Australian Dollar, this is now fully
negative overall.
Last Week in Review
The RBA left rates alone last week as expected. In their statement, things remained the
same though they sounded a bit more downbeat on the Australian Dollar. They mentioned that
the AUD was still too high relative to commodity prices which continue to fall. Sounds like they
are continuing to get more and more negative on the Aussie Dollars value and could be getting
very close to intervening in the market to help bring it down. The other big event last week was
Q3 GDP release which in came in lower than expected overall. The terms of trade in particular
was disappointing as commodity prices continue to fall. In light of this calls for rate cuts by the
RBA are growing as the Australian economy continues to weaken. Also in terms of data,
building permits data improved again as did Australias trade deficit with imports falling into
negative territory and exports rising, coming in stronger than last month.The other big event
last week was the overall down move that occurred in the Australia Dollar as it continues to
weaken agains the US Dollar in particular.
be speculation that they will continue to intervene in the markets going forward. Overall then,
the tone for New Zealand remains in neutral territory overall.
Japanese Yen
Overall Picture and Its Tone
Japan as a whole is very weak right now, politically, socially and economically. On the
economic side, businesses continue to be weak as manufacturing, services and industrial sectors
continue to be weak however on a bright note, corporate profits continue to rise. On the
consumer side, consumer sentiment and consumption both remain weak as seen recently in
household spending and retail sales data. As for trade, imports and exports have been weak but
now both are improving some while the overall trade balance remains in negative territory.
Inflation also remains weak and continues to fall causing deflation to persist. On the
government side of things, debt remains high while recent tax hikes meant to bring down the
level of debt in the country have caused yet more weakness in the economy. The government in
general remains stuck in old ways and lacking reforms to help revise the economy. As for the
central bank they continue to remain very negative overall with low interest rates and and a
quantitative easing program that puts all others that have occurred or are occurring to shame as
its size is huge. A couple of weeks ago too, the central bank surprised the markets by
implementing and increasing their QE program. Finally, on the social side of things, as the
population continues to age the levels of debt continue to increase while other social
developments continue to cause weakness in the economy. Overall then the picture of Japan is
very negative right now.
However business sentiment remains bleak. Employment also rose and there was much concern
and uncertainty for the future by the respondents in terms of the sales taxes and the upcoming
elections. Then, to close out the week, Coincident index came in better than previous while
Leading economic index number slipped versus the previous reading. As usual too, the Yen
continued its decent overall last week, especially against the US Dollar, with the USD/JPY pair
reaching the important 120.00 level.
economy to more of a services based country in terms of their main revenue and GDP growth
source. As for the housing market, prices continue to move lower as does loan growth putting
pressure on the consumer and the economy as a whole. With lower housing prices the demand
for existing and new housing is slowing and with the real estate market being such a big driver
of growth in China, this is putting a strain on its overall growth. On the government side of
things they continue to work on pushing through reforms to move the economy form a
centrally, government controlled economy, to a more market baed economy. During their recent
Fourth Plenum meeting they highlighted these reforms they are and want to implement
especially focusing on making the law system freer. As for the central bank, they continue to
implement reforms and easing measures to help revive the economy including reserve ratio for
certain banks and other reforms to help rural regions and the real estate market improve
including rate cuts recently. Interest rate liberalization is also one of the main things on the
central banks agenda in terms of reforms they want to implement. Overall then the tone of
China is a more negative one right now as reforms being implemented by the government and
central bank continue to cause weakness in the economy while overall global growth being
weak is causing the manufacturing industry to be weak right now.
Sunday night (US EST time) Trade balance data will be released and then on Thursday
Industrial production, retail sales and Urban Investment numbers will all be released and give
more of an indication of how the Chinese economy is doing. Both retail sales and industrial
production numbers have been moving weaker lately so any sign of improvement will be
encouraging though will likely do little if anything in terms of bets of more easing by the PBoC.
Overall perceptions towards China continue to be mixed to negative though as the markets
continue to be more negative towards it while businesses seem to be mixed to more positive.
France. As for the central bank, they continue to remain very dovish, recently implementing a
sort of QE program with the purchases of covered bonds and ABS assets in a bid to help revive
the Euro Zones struggling loan and banking industry in order to therefore revive economic
growth. They also have cut rates quite a good amount since about June of this year with one of
their rates now in negative territory. So overall the tone of the Euro Zone is negative.
stress tests that were to occur soon after. However expectations are now that banks will take up
a bigger amount of the TLTROs being offered this round. If the take up is a good amount, then
this will likely be seen as a positive development for the Euro Zone and hence the Euro and so
we could get yet another round of the Euro going higher.
British Pound
Overall Picture and Its Tone
The overall economic picture is one of strong growth while some weakness has been seen
recently in some sectors. The recent weakness has been seen in particular in the manufacturing
and services industries with the latter being of some concern as the UKs economy is so
dependent on this sector for its growth. Other weakness has been seen in the countrys exports,
though not too surprising there as the Pound continues to be strong overall. Imports also have
fallen some over the last few months. As for the consumer, consumption has moved lower as
seen in recent weakening in Retail Sales data while sentiment numbers have begun to weaken.
This weakness in consumer sentiment has stemmed in part from a weakening housing market
as house prices fall as well as construction activity. As far as inflation goes, this also continues to
move lower as the UK follows the rest of the world (or a large part of it) into a world-wide
deflationary trend, in some respects. This low inflation and weaker growth has also kept the
BoE at bay in terms of them raising rates. They continue to be neutral on that fact and the
market is currently expecting them to keep rates on hold and not raise them until the middle
part of next year at the very least. Another concern of the BoE, which has kept them from
raising rates at this point is the low wage growth. However the labor market as a whole
continues to improve as the number of newly employed continues to rise and the number of
unemployed continues to fall. Overall then the tone of the United Kingdom is neutral to slightly
positive.
expected and previous however not all is bad looking at the internals. Employment and new
orders continued to increase while delivery times are getting longer due to supply issues for
materials. There is also a continued need for more skilled workers, either foreign or domestic.
Overall though the construction sector continues to be strong in the UK and last months
number could very well be weather related. The other event to occur last week was the BoEs
monthly meeting and rate where they left rates and their QE program as before; so no change to
either. Expectations are that the first rate rise from the BoE will be sometime in the middle of
next year, right around the time the US Fed is expected to begin raising rates as well.
Canadian Dollar
Overall Picture and Its Tone
The Canadian economy continues to be mixed overall. The positive side of things is that
inflation continues to be relatively stable and high, though this has likely changed now with oil
moving so low. Overall growth too continues to be supported. As for the consumer this is where
some of the weakness lies as spending remains subdued as seen via retail sales data. As for the
business side of things, this remains supported overall. Oil production also continues to
increase but with prices as low as they are, they are not helping the economy any right now. As
for the housing sector, this remains strong with high prices and good building activity both
being supported by low interest rates. As for trade, exports have started to increase some
recently especially as the US continues to bounce back. As for the labor market, this seems to be
improving as new jobs continue to increase in number and the unemployment rate continues to
move higher while wages remain weak, as seems to be norm right now. As for the central bank
they remain neutral to dovish in their tone towards the Canadian economy though they are
starting to sound a bit more optimistic now as the US economy, which Canada is very
dependent on, continues to improve. However, they continue to see recent inflation levels as
being just temporary and still continue to expect weaker growth for a while going forward.
Overall then the tone of Canada as a whole is neutral in relation to the monetary policy in
particular.
in the manufacturing sector due to the increasing value of the US Dollar. However this sector, as
well as the industrial and services sectors continue to grow. Business sentiment also remains
strong. The employment sector continues to be good overall with rising employment and falling
unemployment. However problems remain as long term unemployed people continue to
struggle to find jobs and the skills gap continues to widen as fewer and fewer have the skills
necessary to do high tech jobs that are so vital to a nations growth. As for the consumer, they
also remain pretty good though weak wage growth continues to be a problem and consumption
is down some now looking at retail sales data. Sentiment though for the consumer remains
strong overall. Trade continues to do well with both exports and imports strong though the
deficit in the US continues to deepen. As for inflation, this continues to stay steady, but steadily
below the Feds target. As for housing, after a good start this year this sector has weakened
some in the past few months as rate hike expectations continue to be in focus for this industry.
As for rates, and the Fed, in light of the overall US economic picture they have begun to turn
more hawkish in their tone and in their policy recently exiting their QE program completely in a
bid to begin to slowly tighten policy. The tone from the Fed is also changing, though also
changing as they are sounding more optimistic on the economy and jobs and so on but are still
concerned about low inflation. Looking to the government, this part of the US continues to be in
a wrangle with itself failing to pass any meaningful laws or policy changes to help the economy
grow. Recent mid-term elections have given some people some hope as the Republicans now
control both the House and Senate though with a stubborn President at the helm of things, little
will likely change until after presidential elections in two years. However we will have to see.
Maybe Congress will be able to pull a rabbit out of its hat after all. Overall though the tone of
the US economy is neutral to positive overall due to a more optimistic Federal Reserve and
stronger economic growth that continues to get stronger.
data, construction spending rose for October and Non-Manufacturing PMI number for
November came in better than expected. ISM Manufacturing also came in better than expected
though prices paid shoed a steep decline, not a good story for inflation. Labor costs also fell for
the third quarter pointing to possible lower wages going forward though that doesnt seem to
be the case yet if last weeks NFP data was any indication. Also last week we heard from the
usual group of Fed members as they gave their assessment on the US economy and Fed policy.
Fed member Dudley talked about the need to let the economy run slightly hot for a while
before raising rates while Plosser outlined and argued for rate hikes in order to mitigate the
risks of rates being low for too long. On the outside, the Fed seems to be getting closer and more
comfortable with the idea of raising rates, and soon too. On an overall basis though the US
economy seems to be chugging along quite nicely and strongly while the rest of the world
seems to be falling apart at the seams. Makes me wonder though how long the US can go the
way it has been before it is negatively affected by the rest of the worlds problems. I think it
might not be long.