| Today's Highlights |
US Q3 Preliminary GDP
US Nov Chicago PMI index
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| Market Overview |
Lord Turner will bring joy this morning to all of us hoping to retire with a pension before we turn 100 with his recommendation we work beyond 65 to 69. This will widen further the golf handicaps between private sector and public sector workers who will be retiring at 60. The Euro took a sideline yesterday with three US economic releases coming out much stronger than forecast. US October durable goods orders were three times better than expected, November consumer confidence surged and new home sales jumped 13%. This keeps alive the prospect of further US rate hikes amid talk last week that we were closer to reaching a neutral level. In the meantime the pound should continue to bounce between 1.70 -1.73 this week at the mercy of US data releases. Today the focus moves to growth in the form of Q3 GDP from the Eurozone and the US. There is no clearer measure of US strength over their European counterparts than the 2.3% difference between European growth at 1.5% and US at 3.8%. Today this is forecast to widen to 2.7% which should see further gains from the dollar. Tomorrow’s ECB rate decision will remain this week’s major highlight with a 0.25% rate hike widely expected. However there remains a very small possibility of a 0.50% rate hike or no hike at all. This would certainly throw the cat among the pigeons.
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| If You Are Migrating - A Little More Detail |
| The NZ dollar has rocketed higher recently at the disappointment of the migrants to Aotereroa as well as the Reserve Bank Governor. Earlier this month the governor warned that the kiwi dollar was "exceptionally high, and in some respects this is unjustifiable, in time it will fall." Unfortunately this had little impact on a market driven by the appeal of high interest yields. We have seen a failure to rally higher through 2.60 (as forecast last month) followed by a failure to hold support at 2.50 (a surprise to us at how easily this level gave way). This now opens the way for a test of 2.42 as the interest rate differentials between Britain and NZ widens. Some sectors of the market have started to speculate the possibility that next week the Reserve Bank of New Zealand may surprise and hike rates 0.50% rather than 0.25%. This would push NZ’s Official Cash Rate to 7.50% in contrast to the UK's 4.50%. |
| If You Are Buying Property Overseas - A Little More Detail |
Buyers of Euro have got used to a small range of 1.44 - 1.48 for most of this year driven by predominately by comments from the ECB which have until recently been contradictory, divisive and incohesive. The Euro last week however benefited from ECB President Trichet's comments which surprised the market with a coherent statement signalling the start of interest rate hikes in the near future. He confirmed his role as a spokesman for the ECB to ensure clarity for the future. This was enough for 100% of economists surveyed to predict a 0.25% rate hike tomorrow. The first rate hike in 5 years has seen the Euro rise pushing down the GBPEUR rate. The question is how long before the squabbling returns to the ECB, and is this all she wrote when it comes to interest rate hikes? Buyers should target 1.4700 for the rest of 2005.
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| Today's Major Economic Releases |
MKT GMT Data / Event Last Expected
EMU 10.00 Flash HICP Nov 2.5% 2.5%
EMU 10.00 GDP Q3 0.6% 0.6%
US 13.30 Prelim Q3 GDP 3.8% 4.1%
US 15.00 Chicago PMI Nov 62.9 60.0
US 19.00 Beige Book
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| Yesterday's Major Economic Releases |
MKT GMT Data/Event Actual Last Expected
US 13.30 Durable Goods 3.4% -2.4% 1.5%
US 15.00 Consumer confidence 98 85 90
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| Quote of the day |
A lie gets halfway around the world before the truth has a chance to get its pants on.
Sir Winston Churchill |