David Chaston standing in for Bernard Hickey, with Ninety at Nine, brought to you in association with the Bank of New Zealand.
The new week starts with the currency at 81.4 US cents, high because of a weak US dollar and a weakening US economy. Economic growth there is with little job growth, it seems. And the stand-off over their debt-ceiling law is getting serious. The Dow is down another half percent.
Last week S&P warned that commodities face an uncertain price future, but that warning seemed to exclude food commodities. Fonterra’s latest auction was strong. But oil and gold prices are not going anywhere at present in currencies other than the US dollar.
Much depends on how China responds to its inflationary pressures. Their exchange rate policies are making their problems worse but they need high growth to keep their people employed. The longer they delay making adjustments, the bigger the impact of change.
The immediate Greek crisis has been averted by Germany stumping up with more bailout funds. And, perhaps we are seeing a takeover of sovereign budgets by the ECB – there was a report over the weekend that this is a goal of ECB chairman Trichet – who is feaful that debt restructuring being pushed by governments will fall on their huge holdings and key German and French banks. However, that just means that when a meaningful adjustment in Europe occurs, it could well lead to an international crisis, and not just a European one. The Europeans are just kicking the can down the road.
Watching all this with concern will be Alan Bollard, who reports on our monetary policy settings on Thursday when he reviews the OCR.
We also get house price data later this week – QV and REINZ - and if the Barfoot announcements last week were any indication, May will not be testing any limits, up or down.
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