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December 2016

Dollar flickers on South China Sea incident

Published: Monday 19 December 2016

  • Dollar flickers on South China Sea incident
  • Sterling strong as EU costs debate rages
  • NZ business confidence up

How was the shopping? Yup…utter madness; ….same here. Oddly, financial markets are a little calmer than the Christmas markets right now. So, welcome back to a bit of sanity.
 
Whereas last week was a story of central bank disparity, this week will be a data driven week with an eye on the thinner markets expected in the next week or so. It starts with more Brexit discussion and much speculation over just how much it will cost the other members of the EU as and when the UK leaves and takes its contributions away. Whether you believe the figure on the bus or the more conservative numbers, there is no doubt that the UK is the second largest net contributor to EU coffers and that’ll be a big hole to fill. Cuts or higher contributions from the remaining members or a combination of the two will be necessary. That is probably driving the vitriol coming from certain EU leaders.
 
Tension between US and Chinese naval vessels in the South China Sea caused a flutter of activity with the US Dollar and US equity markets but things are a tad calmer since no nukes were fired and no land offensives or sea battles were reported. We will get a speech from Federal Reserve Chairwoman, Janet Yellen, later today, so I am sure she will be asked about the Fed’s plans for 2017 rate hikes after the widely expected 25 basis point rise on December 14th.
 
We heard overnight that New Zealand business confidence is higher, but tight credit market conditions are still causing some concern. A net figure of nearly 40% of businesses saw improved activity in their own firms in the future and that was a couple of percentage points higher than in November. The NZ Dollar is a tad stronger as a result.
 
This morning brings the respected German Information and Forschung institute’s (Ifo) business confidence indices. A margin rise is expected. This afternoon offers nothing much other that Janet Yellen’s speech, but we’ll get the Reserve Bank of Australia’s Board Meeting minutes overnight and that will be interesting.
 
And congratulations to Andy Murray for winning the BBC’s Sports Personality Of The Year award for the third time. I did wonder, though, how you determine a winner amongst so many amazing 2016 performances. Maybe it is less about the choice between 16 astonishing individuals and more about which fans of which sport are numerous enough at home on a Sunday night to get their candidate in front. Is that why Andy broke the trophy, or did Lennox do it through just not knowing his own strength?
 

Accent

 
A Louisiana woman is late for Sunday Mass. She grabs the first ironed dress and outfit from her wardrobe and throws it on before running madly towards the Church. As she approaches she sees people leaving the Church yard and she spots her cousin Billy Ray.
 
“Hey, Billy Ray”, she calls as she meets him. She puffs and pants as she says, “Is Mass out?”
 
Billy Ray walks in a circle around her, looking her up and down, before saying “Nope Ellie May, it looks just fine, but your hat is a little crooked.”

 

Today's Major Economic Releases
 

Market BST Data/Event Previous Expected
EUR 09:00 EU: German Information and Forschung (Ifo) Business Climate  110.4 110.7
AUD 13:30 Australia: Conference Board Leading Index 0.5% 0.5%
USD 14:45 US: Flash Services Purchasing Managers' Index  54.6 55.2
NZD 21:45 New Zealand: Food Price Index -0.8% -0.8%
 

 
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Daily Currency Analysis by David Johnson
 
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