Chinese rate cut

Google is using its vast computing resources to identify the 50 most popular scary costumes for America's forthcoming Halloween celebrations. Sharks and wolves only just scrape in at 48 and 49, while up there at number 6 is the terrifying Minnie Mouse. Mark Carney doesn't figure on the list.

The Bank of England governor could be a late entrant to the rankings though, if sterling's supporters demonise him for a comment he made to the Daily Mail. Talking of future interest rate increases by the bank he said "There's no certainty that they will happen". Wow. Fortunately, investors have not taken him literally.
Most believe higher rates are inevitable: it is just a matter of when they appear.
While Mr Carney was musing to the tabloids the People's Bank of China was getting on with business. In a move that did not come as much of a surprise the PBoC lowered its benchmark interest rate from 4.6% to 4.35%, the fifth cut this year. Surprise or not, the announcement fired enthusiasm for the Australian dollar, on the assumption that stimulus for China's economy will also be positive for its biggest supplier.

Unintended consequences
The Chinese rate announcement was also positive for the US dollar. The rationale there was that lower yuan interest rates - with the prospect of further cuts next year - lower the bar for a rate increase by the Federal Reserve. The Greenback shared victory with the Aussie, both strengthening by 0.5% against sterling.

The argument is that softer Chinese rates will allay the Fed's fear that a higher Funds Rate would derail recovery in emerging markets. If the PBoC is increasing its stimulus the Fed can reduce its own. During the afternoon following the announcement the dollar added three quarters of a cent against the pound and the euro. It was helped by a better-than-expected provisional reading for the manufacturing sector purchasing managers' index.

The provisional PMI figures from Euroland were also, by and large, better than expected. They were spoiled, however, by arguably the most important one when the 51.6 from German manufacturers fell short of forecast. Friday's only other ecostats were for Canadian inflation. The headline rate was lower than expected at 1.0%, sending the Loonie a cent lower against sterling.

Take your marks
Some quite heavyweight data will be coming out this week, including US and UK third quarter economic growth. There will also be interest rate announcements from the US Federal Reserve and the Reserve Bank of New Zealand. The build-up will begin slowly today.

It kicks off with German import prices and business confidence and moves on this morning to BBA mortgage approvals and the CBI Industrial Trends survey (UK manufacturers' order books). After lunch come US new home sales and the Dallas Fed's manufacturing index. 

Tonight's trade figures from New Zealand will be more important, at least to the Kiwi. They will be the last NZ ecostats before Thursday's RBNZ rate decision.