Thursday, July 24, 2008

Data dump

Well, the RBNZ did the right thing last night (at least for Macro Man's portfolio!), cutting rates by 0.25% and suggesting that there's more easing in the least as there's no "excessive" exchange rate depreciation. Given that the last Monetary Policy Statement forecast a 10% or so decline in the TWI over the next couple of years, you'd have to posit that there should be a lot of room to the downside before NZD weakness gets "excessive." NZD/USD is butting up against decent support around 0.7385 or so, and it might be a bit of a tough ask to look for a break today. But when the level goes, expect the kiwi to drop like the flightless bird that it is.
Elsewhere, there's been quite a few key datapoints released since last night's New York close....a veritable data dump for the macro punter. It kicked off with Japan, where the trade surplus was literally off-the-charts low. What's interesting here is that export growth has really tailed off; y/y export growth is negative to the US, UK, EMU, and North Asia. As the chart below demonstrates, this could ultimately exert significant pressure on the yen to weaken.
In Europe, meanwhile, further evidence emerged that the economy is an egg that's just hit the brick wall of ECB tightening. The ifo, highlighted here as a good leading indicator of ECB policy, took another surprisingly large lurch lower this morning. The expectations component is the lowest since the last recession, and the disparity between the current conditions and expectations components is the widest since unification. Are you watching, M. Trichet?
In the UK, meanwhile, we had the release of June's retail sales, which showed a monthly record drop. Quite a coincidence, given that the previous month showed a record rise. Oi, ONS, here's a quid.....go buy a clue!
So the dollar is trading well, consolidating beyond the levels highlighted yesterday. Anything can happen over the next couple of days, of course....but Macro Man finds himself nursing an increasingly insistent urge to get bullish dollars as the other shoe starts to drop elsewhere in the world. He can only hope that his positioning doesn't end up in another sort of dump.

In the last day of voting, it's neck and neck between Lehman and B&B in the Banking Dead Pool. Vote now: you could decide the "winner"!


Anonymous said...

YEE-HAH! Not only NZD, but GBP took a dive today. The large short position in NZD that you described in yesterday's comments sounds a bit scary, but certainly it looks like a lot of downside remains.

I can't really become a dollar bull on the "everything else looks worse" theory, and I still see raining shoes in the forecast for the U.S., but certainly the euro and the yen don't look great by comparision. MXN keeps marching on, but that has started to look parabolic the last couple of days (although a dollar recovery shouldn't hurt it).

I agree with your comments about risk assets (equities), too. More upside until the shoes start falling again.

Grammar Nazi said...

I also find myself increasingly dollar-bullish.

re: Dead Pool --- though I recently shorted LEH, I'm going to have to cast my vote for B+B.

Anonymous said...

have you looked at the disparity between implied futures 3 month bill rates in nzd? the futures are pricing considerable easing and the rate is well through the central bank rate- which seems odd when you consider the large spreads of libor over other central bank rates...

Macro Man said...

Anon # 1, Yes, the MXN has quietly turned into the uber-currency. Only a matter of time before we hit a 9 handle.

Anon # 2, I think consensus is that the RBNZ takes rates down a couple percent in a pretty straight line...which seems to have been partially validated by the statement last night. Hence the rally. As for why NZD has lagged, I got three words for you:




Anonymous said...

MM - I was trying to duplicate one of your charts -- Japanese trade balance against (reversed) USDJPY...

The data I got from the MoF looked markedly different (its entirely possible I have the wrong series).

Could you give a link of where you got your Trade Balance data?


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