FOREXYARD: Forex News Blog | |
- Brazil Unexpectedly Slashes Interest Rates
- US Non-Farm Wages Increasing
- Swiss Purchasing Managers More Optimistic; Retail Sales Data Disagrees
- Australian Spending Data Surprises Investors
| Brazil Unexpectedly Slashes Interest Rates Posted: 01 Sep 2011 08:30 AM PDT
In an age where central bankers are attempting to increase transparency in the policy making decision process the Brazilian central bank gave a prime example of how not to conduct monetary policy communications when it unexpectedly slashed interest rates by 0.50%. Leading up to today's 50 bp interest rate cut the Central Bank of Brazil had increased interest rates in its last five consecutive meetings to a rate of 12.5%. The central bank cited the risks for lower potential growth in the global economy which could bring a bout of disinflationary forces. Copcom said the "moderate adjustment" in the interest rate is consistent with inflation expectations in 2012. When comparing today's move with those of the world's two leading central banks the Fed and the ECB the contrasts are startling. Central bank policy is sometimes compared to that of an aircraft carrier making a 180 degree turn rather than a two propeller speed boat. Wording is carefully chosen. Former Fed Chairman Alan Greenspan was famous for hour long speeches which could leave analysts guessing if the Fed chief's wording hinted at a hawkish or dovish monetary policy. Ben Bernanke learned the hard way early in his tenure as Fed Chairman when an off the cuff comment at a dinner to Maria Bartiromo caused the stock market to tumble once his comments were published. The ECB is famous for its traffic light system indicating its intention to adjust interest rates. In a day and age when the Federal Reserve Chairman has increased transparency by opening the floor to questions from reporters, how does the Central Bank of Brazil explain its preemptive strike in the currency war from a tightening cycle to a loose monetary stance without providing the markets with any warning? Both FX and rates traders will have to wait for the release of the central bank's meeting minutes to get a glimpse in the Copcom's thinking. Until then more volatility may be seen in both the yield curve and in the rate of the Brazilian real. A couple assumptions can be taken from this policy move; inflation expectations are declining in both developed economies (UK) and in the emerging economies (Brazil). Perhaps Brazil is betting on a global recession in which inflationary pressures play second fiddle to that of steady growth rates. Read more forex trading news on our forex blog. |
| Posted: 01 Sep 2011 08:16 AM PDT
The American economy published two figures early Thursday afternoon which suggest working conditions and wages are on the rise at the start of the third quarter. The Bureau of Labor Statistics issued a revised version of its Non-Farm Productivity report which revealed a 0.7% decline in productivity, which is assumed to be equivalent to a similar increase in worker wages. Confirming this assumption was a second quarterly report, also revised, on Labor Unit Costs. The expectation was for a rise in labor cost of 2.3%, up from last quarter's 2.2%. The actual result revealed a 3.3% increase for the cost of labor, supporting the notion that wages are on the rise across the non-farm sector of the US economy. This is expected to translate into higher consumer spending and capital investments over the coming months, and may help the US dollar (USD) rise from heightened demand over the long-term. Read more forex trading news on our forex blog. |
| Swiss Purchasing Managers More Optimistic; Retail Sales Data Disagrees Posted: 01 Sep 2011 08:11 AM PDT
The reading from this morning's SVME purchasing managers index (PMI) out of Switzerland underscored a moderate uptick in the level of economic optimism among purchasing managers. The forecast was for a dip from last month's 53.5 reading to 51.1. The actual results came in at 51.7, suggesting better conditions than were previously assumed. Data on retail sales from Switzerland, however, seemed to contradict the notion of healthy growth. Economists were expecting the retail sales report to dip from last month's reading of 7.9% growth, year-on-year, to 4.6% in the month of August. The actual results were far more dismal at 1.9%, suggesting an impending bearish turn for the Swiss franc (CHF) from decreased demand. Read more forex trading news on our forex blog. |
| Australian Spending Data Surprises Investors Posted: 01 Sep 2011 08:08 AM PDT
Two reports this morning surprised investors with seemingly out of place optimism in the private expenditures sector of the Australian economy. At 2:30 GMT the Australian Bureau of Statistics issued two indicators that demonstrated a solid uptick in retail sales and private capital expenditures. The retail sales report was anticipated to see sluggish growth near 0.3%, but surprised traders with a relatively stronger 0.5% reading. Private capital expenditures, which report the quarterly change in new capital investment by private firms, revealed a healthy 4.9% growth in the second quarter. The figure was down from the first quarter's reading of 7.7%, but well above the forecast 4.1%, making it bullish yet ominous. Read more forex trading news on our forex blog. |
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