Daily Brief

Daily Brief

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Cuts for all

Rate rethink helps antipodeans

Tuesday's biggest losers, the NZ and Australian dollars, collected the biggest gains yesterday. Both added two cents or more, strengthening by over 1% against sterling. There was little to separate the pound from the US dollar, the euro, the franc and the yen.

The Kiwi's recovery seems to have been sparked firstly by cuts in the benchmark rates of Thailand and India, which diluted the impact of the RBNZ move, and secondly by a perception that lower rates elsewhere are around the corner. The assumption is that, with global growth difficult to find, central bankers are feeling a collective urge to relax monetary policy and yesterday's rate cuts are symptomatic of a trend. 

America's president was jealous of yesterday's cuts and called on the Federal Reserve to follow their example: "Our problem is not China… Our problem is a Federal Reserve that is too.....proud to admit their mistake of acting too fast and tightening too much… They must cut rates bigger and faster". There was no response from the Fed.

Cheaper houses

The Halifax and the Royal Institute of Chartered Surveyors reported falling prices for UK residential property. Both measures were weaker than forecast but they came as no surprise to investors and did no damage to the pound.

At the Halifax they see the market treading water. Fewer properties changed hands in the early months of summer but new buyer enquiries are up. The RICS corroborated the Halifax view, "with all the key indicators pretty much flatlining". Its house price balance fell from -1 to -9.

The only other significant statistic during the London session was Canada's Ivey purchasing managers' index. At a seasonally-adjusted 54.2 it was above forecast and nearly two points higher on the month. 

UK growth, Canadian jobs

The most important ecostats between now and the weekend come tomorrow, with second quarter UK gross domestic product and the Canadian employment data for July. The only pan-Euroland agenda item is today's Economic Bulletin from the European Central Bank.

This morning China reported a bigger-than-expected trade surplus for July. Imports were down by 5.6% from the same month last year while exports increased 3.3%. The news was helpful to the Aussie and Kiwi but did not take them far. Today's other data should be easy enough to ignore: US wholesale inventories and weekly jobless claims and Canada's new housing price index. Japan's second quarter GDP and Chinese inflation come out tonight.

On Friday Britain's GDP figures are expected to show the economy stagnating in Q2. Manufacturing and industrial production are expected to have fallen slightly in June and the trade deficit should have narrowed a little. It is likely that business investment continued to decline in Q2. Canada's unemployment rate is forecast to be steady at 5.5% for July after the addition of 12.5k new jobs. Friday's other numbers cover German and Italian trade, Italian inflation and US producer prices. 

GBP: Second quarter GDP tomorrow

GBP: Second quarter GDP tomorrow

NZD: Rebound as rate cut appetite spreads

NZD: Rebound as rate cut appetite spreads

AUD: Follows Kiwi higher

AUD: Follows Kiwi higher

USD: Trump - Cut Rates bigger and faster

USD: Trump - Cut Rates bigger and faster

CAD: Employment data Friday

CAD: Employment data Friday

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