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By HaleStewart October 5, 2014 8:26 am
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International Economic Preview For The Week of October 6-10

     The following economic releases will have a disproportionate impact for the week of October 6-11.


Australian rate decision: the Reserve Bank of Australia will set interest rates and release a policy statement.  The bank is caught in a difficult policy environment.  On one hand is a potential housing bubble forcing the bank to keep rates high and on the other hand is a decrease in natural resource investment and increasing unemployment.  From the last policy announcement:

In Australia, the most recent survey data indicate gradually improving business conditions and some recovery in household sentiment after a weaker period around mid year, suggesting moderate growth in the economy is occurring. Resources sector investment spending is starting to decline significantly. Investment intentions in some other sectors continue to improve, though these areas of capital spending are expected to see only moderate growth in the near term. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend over the year ahead.

The recorded rate of unemployment has increased recently, despite some improvement in most other indicators for the labour market this year. The Bank's assessment remains that the labour market has a degree of spare capacity and that it will probably be some time yet before unemployment declines consistently. Growth in wages has declined noticeably and is expected to remain relatively modest over the period ahead, which should keep inflation consistent with the target even with lower levels of the exchange rate.

The Aussie has recently sold off sharply against the dollar, breaking key support and dropping a bit over 7%.


UK Manufacturing and Business Production: since the first of the year, the UK economy has been on a statistical tear, printing the strongest numbers of developed economies.  Recently, however, the data has weakened, although this is from very high levels.  The index of production increased 1.7% in the latest Y/Y reading.  However, as the chart below shows, both production and manufacturing are still at very low levels relative to their pre-recession positions:


BOJ Monthly Report: the impact of Abenomics has been coming into question since the sharp 2Q GDP contraction was announced.  The monthly report will provide analysts with a wealth of new data to assess the potential direction of the Japanese economy.

Australian Employment: two months ago, Australian unemployment increased from 6.1% to 6.4%.  Although unemployment dropped back to 6.1% in the latest reading, the general analyst consensus was this was a large statistical mistake, placing the Australian Statistical Agency in a tough spot.  This data point could have a pronounced impact given this somewhat controversial background.


UK Interest Rate Decision: The UK is seen as the economy most likely to raise interest rates in the next 6-12 months.  Analysts and traders will be looking at the decision to determine if the BOE has changed the timetable for that potential increase.

Japan Monetary Meeting Minutes: as the potential impact of Abenomics decreases, analysts have begun to argue the BOJ needs to engage in another round of yen devaluation.  The BOJ has not issued any statement confirming this potential development, but look for the stories about this release to highlight this possibility.


Canadian Employment: Much like the US economy, Canada has been growing slowly but consistently.  But last month’s GDP release showed a 0% gain, meaning the employment report will have a disproportionate impact as analysts try to determine if the 0% growth was the beginning of a new trend or a statistical anomaly.  The unemployment rate has been stuck around 7% for the better part of the last year.

Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer

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