One Financial 11:09

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  W eekly Sentiment Paper    Distributed by: One FinancialFor the Week of: 11/09 through 11/15  Written by: Andrei Wogen  Email: Week in Review   2Australian Dollar   2New Zealand Dollar   4Japanese Yen   6China Renminbi; Onshore, Yuan   7Euro Area: Euro   9British Pound   11Canadian Dollar   12United States Dollar   14Order Levels   16  Week in ReviewAustralian Dollar Overall Picture and Its Tone Overall Australia is weak economically. The weak points continue to be weak mining sector and the employment sector while the consumer also remains weak and feels weak as  both retail sales and consumer sentiment have been weak respectively. As for the business ãUS NFP numbers come in lower than expected while previous numbers from August and September were revised higher; unemployment rate fell while wage growth remains weak ãCanadian employment data comes in better than expected with the number of newly employed rising much more than expectedãECB stays course and leaves rates and policy unchanged; Draghi dovish on the economy while also dogging questions and dampening concerns raised about his management style within the ECB after an article on Reuters was released regarding this last week ãAustralian employment data was good overall though with recent adjustments in the data and the calculations of the data, the market’s trust in this data has been weakenedãNew Zealand employment data comes in better than expected with the unemployment rate falling ãRBA leaves interest rates steady while their statement stays virtually the same; their concerns about the high Australian Dollar continue and seems to be getting more intenseãRussia central bank freely floats the Rouble signaling the struggles the bank has had in defending its currency from depreciation in the light of bets against it as oil prices continue to fall causing weak growth in Russia ãBoJ monetary policy meeting minutes from their meeting on October 6th shows no indication that the additional easing measures implemented by the Bank at their next meeting on October 31st was comingãReports that fighting in Ukraine’s Donetsk region is escalating again as a high school is hit killing two students and there were reports of Russian tanks crossing into Ukraine  sector, manufacturing and services sectors continue to weaken as does business sentiment. Politically speaking, the country is doing well but recent budget problems have caused the government to cut down on spending and adjust policy in order to keep debt from rising too much. This action has also caused consumer sentiment to weaken. Another thing that has caused some worry from the government is the strong housing market. Prices continue to rise which is helping to support consumers some but has caused the government to voice their disproval of these high prices worrying about a bubble forming. As for the central bank they continue to remain neutral to slightly dovish while continuing to keep rates at historical levels. They continue to say that rates are the right level to foster growth and investment. Overall then the tone of Australia is neutral to slightly negative. Overall Sentiment of the Australian Dollar   As for the overall sentiment towards the Australian Dollar, this remains neutral to negative as the currency has moved high by quite a bit versus the Yen but has now fallen versus the US Dollar after being in a range. Main drivers of this negative sentiment continue to be weakness in Australia and the US being strong economically. Last Week in Review   Last week, the Australian Dollar began to show more weakness as the release of better than expected employment data was largely ignored by the market. This is understandable though given the readjustments seen recently in the data which has shown different calculations for the data being released versus what was released in the past. On the policy side of things, the central bank met for its monthly meeting but left rates unchanged and to a large extent, left their policy statement unchanged as well though with greater emphasis on their worry about the high value of the Australian Dollar. However, on a note regarding that worry, the Australian Dollar relative to the USD is pretty much at the level now the central bank has wanted it to be so why they think it is still too high is of interest to me. Tells me that the currency is indeed too high and that its value is still not helping to support the Australian economy, especially in their exports. We could therefore see some more jawboning and/or actual policy changes to help  bring down the Australian Dollar even further than where it is now. Overall though, at the end of last week, the relationship between the overall conditions of Australia and the overall sentiment of the Australian Dollar began to move more inline with each other. The Week Ahead and Other Thoughts This week is not so busy though with some data to watch nonetheless. Home Loans and Investment Lending for Homes are both being released on Sunday night (EST US time) and due to the concerns continuing to increase from the government on the strength of the housing market, especially in terms of the investor activity in the housing sector, these data releases will garner interest from them. On Monday Consumer and Business Confidence numbers and House Price numbers will be released and then on Tuesday Wage Price numbers will be  released and then closing out the week in terms of data from Australia, on Thursday Consumer Inflation expectations will be released. Both inflation expectations and wages have been moving lower in the past several months and so any sign of recovery in these will be an encouraging sign for the RBA and for the Australian economy as a whole. New Zealand Dollar Overall Picture and Its Tone New Zealand as a whole continues to do well though has weakened some over the past few months, economically speaking. Lower commodity prices, lower house prices and lower inflation have been the main weaknesses for the New Zealand economy. Other weaknesses have  been a deteriorating trade balance, along with falling exports, a fall in business and consumer sentiment which has also translated into lower consumer spending via retail sales data. However all is not bad in New Zealand and actually things are pretty good despite these negatives. Though business sentiment is low, it is still high in historical terms which has been seen in the manufacturing sector in particular which remains strong as well as the industrial sector. As for trade, imports continue to rise while the labor market also remains strong with falling unemployment and increased employment overall. However, as is the case around the world overall, wages continue to remain weak. Looking to the housing market now, after rising prices from the beginning of this year, they have fallen now from their highs after implementation of policy to help cool the housing market went into effect several months back. This, and now weaker building permits, continue to cause the housing market to weaken overall though in some parts, construction remains active overall. As for the government, they continue to remain strong as pro-growth policies and increased government spending continue to help support the economy and with the recent elections keeping the incumbent prime minister in power for another term, there will likely be little change. In regards to the central  bank, after having tightened policy by raising rates three times this year beginning in March, the central bank is now on hold indefinitely after falling commodity prices and lower inflation have caused the Bank to reassess their estimates of future inflation in the country. This is a pretty big turnaround for them from just a few months ago when they were talking about seeing a need to raise rates pretty consistently due to what they used to see as inflation pressures building. However these pressures have since diminished or left altogether and so in response the central bank is expected to be on hold until at least the middle of next year and
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