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September 2016

Dollar strengthens on oil price fall

Published: Monday 26 September 2016

  • Dollar strengthens on oil price fall
  • NZD weaker as trade gap widens
  • US president debate dominates thoughts 

​Canadian consumer prices contracted in August, as shown in Friday’s data.  The forecasts were for a 0.1% hike but the actual data showed a 0.2% fall. This announcement came as pressure was mounting for the conclusion of a trade deal between Canada and the EU. And that pressure comes at a time when the EU may abandon – for now – any chance of a trade deal with the US. Perhaps Britain can take a step forward in the queue.
Friday brought the report of a surprise drop in US manufacturing activity. That brings into question the calls for early interest rate hikes and supports the Fed’s stance on delaying any such moves. Adding to the US Dollar activity, oil prices fell at the end of last week after rumours that Saudi Arabia would not enter into a deal to reduce output unless Iran agreed a freeze and that is highly unlikely. The Saudi’s blatant plan to keep prices low to stifle alternative sources is ongoing and that will keep energy costs low for now. That strengthens the USD because oil is traded in the greenback and we have seen Sterling and the Euro succumb to that strength overnight.
But these may be mere side-lines to the real global problem according to the Governor of the Bank of England. Mark Carney warned that the excessive expansion of debt in China is the next big threat to global growth. The concern is that, if Chinese debt was driving things as far as demand is concerned, what happens when that slows or stops? Answers on a postcard to the BOE and mark your envelope with OMG.
Overnight we had a very poor set of trade balance data from New Zealand. The deficit widened to NZ$3.1 billion on the year and that was much worse than expected. The GBPNZD rate would have risen a lot if Sterling were not so poorly supported.
This week starts with a smattering of EU and US data but the speech by the head of the European Central Bank may hold some clues on whether the ECB can do anything more to stimulate growth in Europe. There will be a speech by the Governor of the Bank of Canada as well and that will be interesting after Friday’s very poor Canadian inflation data and will be closely watched.
But all of that is likely to be overshadowed by this evening’s US Presidential debate between Hilary Clinton and Donald Trump.  An estimated audience of 100 million will watch the 90-minute debate and it could be the event that decides the course of US policy for the next 5 years. No pressure then.
There is plenty to come in the rest of the week but I will cover that in tomorrow’s report. For now, I will leave you with news that there is a film doing the interweb rounds that will make grown men wince and anyone who has been cheated on, laugh like a drain. It shows a young woman explaining to her friend in a car that she has discovered her boyfriend has been unfaithful before mentioning that he must have forgot the Taser he bought her for Christmas. The camera follows her into the house where she uses her Christmas pressie to zap the chap in this privates. Real or fake, I can’t decide but ouch!
At the ranch
“Good morning Sir. My name is Agent Coleman and I am with the FBI. I need to examine your property because we think some items of interest were concealed on your fields.”
The rancher says, “Yep. That’s fine just as long as you don’t go in the top field over there.”
“I don’t think you understand”, says the Agent, as he pulls his badge out of his jacket. “This badge gives me the authority from the President to go anywhere and do anything I need to in order to prosecute my duties. Nothing and no one can interfere with me making my enquiries while I carry this badge. Do you understand?”
“Fair enough,” says the rancher as he turns away and lets the agent get on with searching. As he walks away he mutters something about some people never learning. Of course the agent spins on his heels and heads straight for the top field.
20 minutes later, the rancher sees the agent running like Usain Bolt down the hill from the top field, pursued by the meanest tonne of Santa Gertrudis Bull ever known to man.
“Show him your badge”, shouts the rancher. 

Daily Currency Analysis by David Johnson

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