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August 2017

German and French trade slips

Published: Tuesday 08 August 2017

  • German and French trade slips
  • Chinese trade figures knock commodities and miners
  • Rand weaker ahead of Zuma confidence vote
By David Johnson
 
German exports have posted their fastest fall in over two years and imports were down 4.5% on the month to July. That is the largest fall since January 2009. These stats have heaped criticism on Chancellor Merkel for not promoting business investment as she prepares to defend her position in the upcoming elections. French exports also fell as the stronger Euro starts to have an impact. The Sterling – Euro exchange rate is sitting on the support level we last saw in October and November 2016. A break below €1.10 would offer a chance of a dive to €1.09 and maybe even the €1.07 low we last saw in October 2016.
 
We heard overnight that Chinese trade data was well below expectations for July. That caused weakness in mining company stocks and put pressure on the likes of the Australasian and Canadian Dollars. Any weakness in Chinese demand is a substantial shock to raw material producing nations.
 
That weakness was offset for Australia by a very solid Business Confidence Index for July. An index reading of 12 is the best since April and these levels were last seen on a consistent basis all the way back in 2009 and 2010. The Aussie Dollar would have strengthened were it not for the Chinese data.
 
There is growing evidence that foreign exchange traders are heavily ‘short’ on US Dollars; i.e. they have bet that the USD will weaken. Those positions are reported to be the largest accumulation in years, prompting expectation of significant volatility either in the right direction for these traders, or in the opposite direction (USD strength) if something causes those traders to unwind their positions. August can be a very volatile month and this one looks like it may keep with tradition.
 
Controversial South African President Jacob Zuma could find himself out of a job this week after the speaker of their Parliament (a traditional Zuma Supporter) allowing a vote of no confidence by secret ballot.  The Sterling - South African Rand rate is above R17.00 again as markets try to assess the likely impact of a change of government.
 
And the rest of today is pretty light on significant data, but we get the New Zealand interest rate decision overnight tonight. No change is forecast, but the Reserve Bank of New Zealand (RBNZ) continues to have a dilemma over the unwelcome strength of the NZ Dollar, set against a backdrop of strong housing market data and fears over rising inflation.
 
And the Chinese authorities are also in the news for sacking two party officials for the strangest of reasons. One was sacked for casting spells to try to get promoted and the other attended five Feng Shui courses, but claimed they were business trips and claimed £30,000 in expenses for the courses. I think it safe to say neither had much success with their chosen beliefs.
 

Joke

 
An emergency plumber gets a call out to a local doctor’s house. After working for about an hour, and fixing the leak, the plumber gave the doctor a bill for £350. The doctor said, "What the hell is this? I have been to medical school and residency and have been practicing medicine for over 20 years and I can't charge that kind of money for an hour’s work!" The plumber smiled and said, "Yeah, me too. That’s why I shut down the surgery and went into plumbing. "
 
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