Due at 0500GMT, Deputy Governor of the RBNZ Grant Spencer will speak in Auckland about the Bank’s review of prudential regulation.
- From 2335GMT, panel participation by Guy Debelle, Assistant Governor (Financial Markets), at the 2nd Latin America Australia Investors Forum, Sydney
- 0300GMT – Address by Glenn Stevens, Governor, to the Anika Foundation Luncheon, Sydney. Stevens speaks each year here and uses the speech to give his views on the economy and policy – it will generate headlines. The topic is “Issues in Economic Policy”. There will be a Q&A following. There is no live link or broadcast.
Forex headlines for July 21, 2014:
- IMF hikes German economic growth forecast to 1.9% from 1.7%
- Obama still giving Putin wriggle room over militants
- June 2014 US Chicago Fed national activity index 0.12 vs 0.18 exp
- Putin to discuss “safeguarding of sovereignty and territorial integrity”with Russia’s security council
- Confusion reigns in Malaysian plane investigations as Russia goes on the defensive
- Ukraine says there is evidence missile crossed from Russia
- Hilsenrath takes a dig at the bond bears
- WTI rises $1.73 to $104.86
- Gold up $1 to $1312
- S&P 500 down 3 points to $1974
- JPY leads, NZD lags
The market was looking for a theme on Monday but struggled to find it. The tone was ‘risk off’ in the early going on apprehension about earnings and hawkish weekend rhetoric from the White House and Kremlin.
Treasuries rallied, pushing the 10-year yield as low as 2.445%. US 30s also fell to the lowest yield since June. That helped knock USD/JPY down to 101.27 from 101.37 but the tone eased throughout the US afternoon and the pair finished near the highs at 101.39.
The thinking was that something bad could happen in Russia/Ukraine unless a real push for peace gets underway.
EUR/USD was stuck in a narrow range from 1.3515 to 1.3525 and the headlines were a non-factor.
Cable was under pressure in the early going. The Rightmove data weighed and a sense that Carney won’t hike rates has begun to set in. Cable grinded lower to 1.7056 but bids at 1.7050 supported the pound and it turned back to 1.7078. CBI business optimism is due later.
The commodity bloc was caught in the risk chop with AUD and CAD falling in the early going but NZD propped by M&A. When the mood turned around so did USD/CAD as it fell back to 1.0730 from 1.0750. AUD was quieter in a tight range around around 0.9375.
Oil was the big mover in a quick push up to $104.60 as the tensions continue to rise.
The New Normal in the US looks a lot like Japan over the past 20 years. Low growth, low inflation and stubborn stagnation.
One characteristic of the Japanese economy that economists liked to point out was the propensity of Japanese consumers to save. They said it was something in the culture and perhaps that’s partly true.
But it doesn’t tell the whole story and and now their are signs it’s crossing the Pacific. Young people are saving at rates never seen before:
Some 70% of Millennials started saving for retirement at an unprecedented young age, just 22, the survey found. By contrast, the average Boomer began saving at age 35, while Gen Xers got started at 27.
If you’d like a look at the future, see these 10 other trends among Millennials. An interesting one is that they’re not as interested in equities. A consequence could be a deep round of pain if inflation hits.
New Jersey top state economist Charles Steindel will step down after his forecasts proved overly optimistic.
Steindel was responsible for the administration’s estimates of how much revenue would be collected each year. But in four of the five years he served in the administration, his forecasts were overoptimistic. Cumulatively, he overestimated how much revenue would come in by $3.5 billion.
Governor Chris Christie, who is a potential Presidential candidate, has been plagued by revenue shortfalls and rising pension costs. New Jersey has been downgraded 6 times and has the second-lowest credit rating among US states.
On the one hand, it’s good to see an economist held responsible for his numbers, on the other, you can’t help believe that Christie got the numbers he wanted and is using Steindel as a fall guy.
Tax inversions are threatening to be a campaign issue in the mid-term elections.
A trend in the past several years (if not longer) is for US-based multinationals to buy smaller rivals in tax havens and re-incorporating in the low-tax jurisdiction.
The practice is surging in popularity with pharma companies leading the charge. The Obama administration is highlighting the practice and seeks to make it a wedge issue. Republicans have yet to stake out a clear position but have indicated they’re either against it or see it as a part of broader tax reform.
One Republican to watch is Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee and most likely to take over if Republicans win the Senate. He’s on record with some negative comments about changes but has opened the door to some short term measures.
FX traders will want to keep an eye on how much of an issue it becomes. If it becomes a major issue, companies could attempt to complete deals and move capital outside the country ahead of new rules. Overall, the flows are likely to be modest but the issue could could put some minor pressure on the dollar in the months ahead.
The San Francisco Fed is out with an article investigating stagnant wage growth for new grads.
They investigate whether grads are starting off in lower paying jobs but determined that’s not the case. Instead, grads simply aren’t seeing even the marginal wage growth that the rest of the economy is getting.
Because the wages of recent college graduates are less affected by wage rigidity, they are a good indicator of the true price of labor and thus of the underlying state of the labor market.
The double-whammy of low wages and high student loans is a burden that will cripple a generation.
Cable fell as low as 1.7056 just after the London fix. Trading has mostly been lower since UK traders arrived at their desks.
Some medium-sized demand at 1.7050, better buyers at Friday’s low of 1.7037 and more at 1.7030. Bids at 1.7010 and stops below the big figure.
Strong sellers are up at 1.7100 and that was demonstrated as Asia couldn’t get above 1.7099. More strong sellers at 1.7110/15. Buy stops on a break of 1.7120.
Aside from calling France’s bluff over the ship deal Russia could still twirl the gas tap key around its finger in a threat to Europe.
Business Insider has an interesting note from Deutsche bank on the countries that could be most affected by Russia turning off the gas taps.
As you can expect it’s the countries closest to Russia that stand to get hurt the most if the taps get switched off. The others may be able to wear the loss better but it will push costs up and cost the economy. If it lasts into the winter it could threaten supplies and stocks. Like in part one, it’s not something Europe will want to gamble with right now.
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