Here's my summary of the key news overnight in 90 seconds at 9 am, including news there are more signs consumer confidence is starting to rise in Europe, although from low levels.
And staying in Europe, the EU financial transactions tax is dead.
Few euro countries now want it, as they now fear a rapid unwinding of financial power and its shift to Asia and New York. The EU banks have won.
The US economy grew at an annualised rate of 2.4% in the first three months of the year official figures show, down slightly from the original estimate.
The drop in US Government spending was higher than first reported - it was the biggest such decline in more than 50 years - although consumer spending resiliance was also confirmed and more than made up for it.
Wall Street is ending the week on a positive note - reassured that the Fed stimulus will continue a while yet.
Iron ore slumped to a seven-month low, down 30% from this year's high in February, hit by slowing demand from China and a glut of a supply. However, some see it rebounding due to unusually low Chinese inventories.
Gold jumped in overnight trade to US$1,415/oz while the rising yields in US Treasuries took a break, down slightly in late trade. And there has been a selloff in junk bonds.
Yesterday's announcements that the RBNZ was intervening in currency markets needs to be kept in perspective. The RBNZ sold NZ$256 million in April, but currency markets traded more than a $210 billion in kiwi dollars in that month. The RBNZ's foray amounted to about 0.1% of all trades, and unlikely to influence anything. Governor Wheeler will need hugely deep pockets to do anything meaningful. Trading fx is very risky, especially with taxpayers money, and especially if your goal is to move the market and move it semi permanently.
The NZ dollar starts today at 80.8USc, 83.6 AUc, and our TWI is down to 75.9 and its lowest since mid March.
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7 Comments
Excellent little vid about Apple's tax avoidance scams:
http://www.guardian.co.uk/technology/video/2013/may/29/apples-dirty-lit…
Re: gold. Fascinating tug of war between physical and paper markets. Last month central banks bought another 30 tons of the stuff (to put that into context that is 3 times the amount the Cypriots 'threatened' to sell recently):
http://www.zerohedge.com/news/2013-05-27/russia-greece-turkey-other-cen…
Physical demand from the usual Indian and Far Eastern markets remains apparently buoyant.
Meanwhile on the paper markets the shorts are in a very crowded trade, with data from Commodity Futures Trading Commission showing there were 79,416 short contracts (bets on the price falling) for gold bullion for the week ended May 21.
http://www.business2community.com/finance/gold-shorts-rejoice-as-centra…
Who will win? The main danger to the shorts is a sudden squeeze developing (the habitual risk of being in a crowded trade).
The RBNZ sold NZ$256 million in April, but currency markets tradedmore than a $210 billion in kiwi dollars in that month. The RBNZ's foray amounted to about 0.1% of all trades
On the surface the intervention does seem a drop in the ocean. Presumably though most holders of NZD must do so for relatively short periods, and buying and selling by these traders who actually have no need for NZD, would net out over time.
The real trends in the dollar should then be influenced you would think by the much smaller trading for real stuff. Exports and imports are each roughly $4 billion per month; so say $8 billion in trading. The government kneecaps the currency upwards by borrowing another 0.5 bill offshore; but that should be more than offset by capital returns to foreigners for all the stuff we've sold to them over the years. In that context $256 million just might be enough to give the trading direction a nudge, especially when it is made public.
Stephen,
I sense a degree of mockery in your reply, which is fair enough given your infinitely greater experience in forex trading. Do you have a view as to whether say $250 million would make any difference? What is the trading for $210 billion all about? Is my belief that virtually all of it must net out within shortish time frames valid? Why are they buying and selling NZD- is it for short term, even intraday, arbitrage on the direction of the NZD vs another currency, or are they somehow enjoying interest yield? Are they trading in real NZDs or is it just a description of a trade; in the same way I could in theory sell you $1 billion worth of gold as long as you agreed to sell it back to me a few hours later for $1 billion, without either of us having any need to or interest in touching any actual gold.
250M... 10k puff of westerly wind, while the Easterly belts in at 100K Steven L........awful lot like telling the shoppers youv'e a gun in your pocket by ruffling the jacket liner........small commotion...nobody see the gun....they go about their business.
What would be interesting would be to know the timing of Fonterra puts.....during Wheeler intv. cycles.
File under Housing, DC/BH and crew: OECD, reported via Torygraph, shows NZ in Top 5 Unaffordability, and just look at them Rent-to-Income over-vals!
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