New Overnight Developments Abroad: Spotlight on Central Banks

March 18, 2009

The dollar jumped 1.2% against sterling following extremely weak British labor market data and the release of Bank of England minutes revealing unanimous support for quantitative easing in which the Monetary Policy Committee agreed to buy Gbp 75 billion of medium- to long-dated Gilts.

The yen is unchanged against the yen despite the Bank of Japan’s announced 29% increase monthly JGB purchases to Y 1.8 trillion from Y 1.4 trillion. Subsequent press conference remarks by Governor Shirakawa sought to distance this step from quantitative easing.  He called the move a market-stabilizing action, not an attempt to cut long-term interest rates.  He implied a further increase in JGB purchases beyond Y 1.8 tln would be unlikely.

Markets await the FOMC decision at 18:15 GMT.  No changes are expected.  As investors wait, the dollar is off 0.3% against the euro, 0.6% against the Swiss franc, and 0.2% relative to the Canadian dollar.

Gold and oil eased 0.4% to $912.70 per ounce and $48.94 per barrel.  The dollar firmed 0.4% against the kiwi and 0.1% relative to the Ozzie dollar.

Following its policy meeting, Japanese officials voted unanimously to raise monthly JGB purchases and retained the same assessment that the economy is “worsening significantly.”

A 138.4K leap in British unemployment last month was 63% greater than forecast despite an upward revision in January’s increase to 93.5K from 73.8K reported initially.  The February advance was also the largest monthly increase since at least 1971.  The claimant jobless rate increased 4/10ths to 4.3%. A huge drop in bonus pay caused average earnings to post an on-year 0.2% dip in January, its weakest reading in at least 18 years.  Average earnings in Nov-January slowed to a 1.8% pace form 3.1% in Oct-Dec, but the 12-month increase excluding bonuses slid only one-tenth to 3.5%. Productivity in manufacturing fell 5.6% in the year to January, and unit wage costs jumped by 8.1%.  Both changes constituted the most extreme readings since at least March 1985.

Bank of England Governor King urged the coming G-20 summit on April 2nd to focus on boosting growth.

South African real retail sales grew 1.7% in the year to January, much better than expected, but were 1.0% lower from a year ago in November-January.

Swiss retail sales rose 1.2% in the year to January, led by a 4.5% advance in food.

Spanish retail sales plunged 5.4% between January 2008 and January 2009 and by 3.9% per annum over the past 24 months.

Australia’s indices of leading and coincident economic indicators fell somewhat further in January to levels suggesting a recession.

A Polish central bank officials said the zloty’s vulnerability prevents interest rate cuts in increments of more than 25 basis points.

ECB President Trichet was again quoted warning about problems associated with zero interest rates.

Italian industrial production fell much less than feared — only 0.2% — in January but posted a 21.9% unadjusted 12-month decline, as the drop in December was revised from 2.5% to 3.9%.

South Korean unemployment increased to 3.5% in February, most in three years, and jobs fell by 142K, most in 5-1/2 years.

At 12:30 GMT, the U.S. releases current account and CPI data, while Canadian wholesale turnover figures get announced.  The FOMC announcement on rates will be at 18:15 GMT.  No changes are anticipated.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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