In my post yesterday, it was stated in the Reserve Bank of Australia (RBA) rate statement that growth will be below trend for the next few quarters. As a country that is quite dependent on commodities, the decline in commodity prices has taken a toll on the Australian economy.
For the quarter ending September this year, the GDP recorded a growth of only 0.3%, missing estimates of 0.7%.
Check out the full report here.
I missed an entry to short the AUD/USD pair based on fundamentals as the signs of an uninspiring figure were present.
Wednesday, December 3, 2014
Tuesday, December 2, 2014
UK construction 13 month low
UK construction PMI fell to 59.4, a 13 month low since October 2013. The Chartered Institute of Procurement and Supply (CIPS) mentioned that this is due to much weaker increase in civil engineering activity. However, job creation still remains strong in November.
The full report can be found here.
The full report can be found here.
Minimal changes to RBA statement
The Reserve Bank of Australia (RBA) decided to leave the cash rate unchanged at 2.5%.
There are only tiny changes to the statement compared to the one issued last month. The key points are:
- Economic policies have responded in a way to support growth in the property market.
- Growth to be a little below trend for the next several quarters.
- Australian dollar remains above its fundamental value.
Traders should take caution of the final line as a lower exchange rate is likely to be needed to achieve balanced growth in the economy.
The statement can be obtained here.
There are only tiny changes to the statement compared to the one issued last month. The key points are:
- Economic policies have responded in a way to support growth in the property market.
- Growth to be a little below trend for the next several quarters.
- Australian dollar remains above its fundamental value.
Traders should take caution of the final line as a lower exchange rate is likely to be needed to achieve balanced growth in the economy.
The statement can be obtained here.
Australia building approvals more than double estimates
Building approvals in October was at a staggering 11.4%, more than double of what economists expected. This is a huge growth after the contraction of 11.2% in September.
The full report for the building approvals can be found on the Australian Bureau of Statistics website.
Monday, December 1, 2014
ISM manufacturing PMI projection at 58.7
The Institute for Supply Management (ISM) projected the manufacturing PMI in November at 58.7. This is a decrease of 0.3 from October`s 59.0.
Note that this is not the official manufacturing PMI released by the government.
The full report by ISM can be found here.
Note that this is not the official manufacturing PMI released by the government.
The full report by ISM can be found here.
UK manufacturing at a 4 month high
Manufacturing PMI rose to 53.5 compared to October`s 53.3. This represents a 4 month high in terms of the expansion rate in the manufacturing industry.
The full report is provided by the Chartered Institute of Procurement & Supply (CIPS).
The full report is provided by the Chartered Institute of Procurement & Supply (CIPS).
Environmental analysis for startups
Environment is defined in the Meriam-Webster dictionary as the conditions that surround someone or something. It is no surprise that environmental analysis in the context of business strategy is related to the analysis of external factors.
As seen above, environmental analysis can be separated into different layers according to Johnson Scholes and Whittington (JS&W). This is how the macro-environment is connected to an organization and in this post, I shall focus on this layer in the context of a startup.
Before developing the business plan, I believe the crucial step that many startup entrepreneurs overlook is the macro-environment. Here are some models to get started:
1) PESTEL
Who hasn`t heard of PESTEL: political, economic, socio-cultural, technological, environmental and legal factors? Fundamentally, entrepreneurs need to identify the factors that may contribute to the success of their business idea. For instance, in my dating startup, due to socio-cultural differences in Europe and Malaysia, our content has to vary. Also, in the real world, a number of these factors are interconnected and thus should not be seen separately.
2) Key drivers of environmental change
It is of utmost importance that entrepreneurs remember the business environment is not static. The key drivers of environmental change are based on globalisation trends:
- Cost globalisation
- Market globalisation
- Global competition
- Government policy
Entrepreneurs should have a bird`s eye view when working on a business idea. The strategic part of planning is crucial and should not be overlooked.
China`s manufacturing expanding slower than expected
China`s manufacturing PMI fell to 50.3 in November, failing to meet estimates of 50.5. In comparison, October`s manufacturing PMI recorded a figure of 50.8.
As for the HSBC final manufacturing PMI, it recorded a level of 50.0.
These data show that the expansion of the manufacturing industry is slowing down as both the official PMI and HSBC final fail to better the results in October.
As for the HSBC final manufacturing PMI, it recorded a level of 50.0.
These data show that the expansion of the manufacturing industry is slowing down as both the official PMI and HSBC final fail to better the results in October.
RBNZ: Reflections on 25 years of inflation targeting
The Reserve Bank of New Zealand (RBNZ) Governor Wheeler delivered a speech on inflation targeting done by the central bank for the past 25 years. The insights of the speech are:
1) Inflation targeting has delivered price stability without reducing long term growth rate.
2) Low and stable inflation expectations increase monetary policy`s effectiveness.
3) The long term path of real exchange rate is unaffected by the monetary and exchange rate regimes.
4) There are limits to what monetary policy can do: supportive structural and fiscal policies are also needed.
5) Monetary policy`s independence requires a high level of accountability and transparency.
6) Monetary policy needs to be supported by sound prudential policies.
7) The emergence of marco-prudential policies.
In his concluding comments, Governor Wheeler mentioned that there has been strong growth in new sector of activity including the information technology sector. He also remarked that the economy has remained resilient in the recent shocks from the GFC and Christchurch earthquakes.
The full speech can be found here.
Figure 1: Inflation and GDP growth
Figure 2: New Zealand`s real effective exchange rate
This is where traders should take caution as the RBNZ has mentioned several times that the exchange rate has been too high and making exports uncompetitive.
FXStreet has a recap on this speech as well.
1) Inflation targeting has delivered price stability without reducing long term growth rate.
2) Low and stable inflation expectations increase monetary policy`s effectiveness.
3) The long term path of real exchange rate is unaffected by the monetary and exchange rate regimes.
4) There are limits to what monetary policy can do: supportive structural and fiscal policies are also needed.
5) Monetary policy`s independence requires a high level of accountability and transparency.
6) Monetary policy needs to be supported by sound prudential policies.
7) The emergence of marco-prudential policies.
In his concluding comments, Governor Wheeler mentioned that there has been strong growth in new sector of activity including the information technology sector. He also remarked that the economy has remained resilient in the recent shocks from the GFC and Christchurch earthquakes.
The full speech can be found here.
Figure 1: Inflation and GDP growth
Figure 2: New Zealand`s real effective exchange rate
This is where traders should take caution as the RBNZ has mentioned several times that the exchange rate has been too high and making exports uncompetitive.
FXStreet has a recap on this speech as well.
Key indicators this week (Week 49)
Monday (1/12)
- RBNZ Governor Wheeler is set to speak
- China manufacturing PMI
- China HSBC final manufacturing PMI
- UK manufacturing PMI
- US ISM manufacturing PMI
Note: Chinese data would be an indicator for the Australian GDP out on Wednesday.
Tuesday (2/12)
- Australian building approvals
- RBA cash rate
- RBA cash rate statement
- UK construction PMI
- New Zealand GDT price index
Wednesday (3/12)
- Australian GDP
- UK services PMI
- ADP non-farm employment change
- ISM non-manufacturing PMI
Note: The ADP non-farm employment change is an estimated change in the labour market that is out 2 days before the government one. May or may not be indicative of the actual numbers.
Thursday (4/12)
- Australian retail sales
- Australian trade balance
- UK official bank rate
- UK MPC rate statement
- Euro minimum bid rate
- ECB press conference
- US unemployment claims
Note: Euro pairs usually drop during the press conference and a fall of 100 pips is normal. Shorting EUR/USD now would be a good option.
Friday (5/12)
- US non-farm employment change
- US trade balance
- US unemployment rate
- RBNZ Governor Wheeler is set to speak
- China manufacturing PMI
- China HSBC final manufacturing PMI
- UK manufacturing PMI
- US ISM manufacturing PMI
Note: Chinese data would be an indicator for the Australian GDP out on Wednesday.
Tuesday (2/12)
- Australian building approvals
- RBA cash rate
- RBA cash rate statement
- UK construction PMI
- New Zealand GDT price index
Wednesday (3/12)
- Australian GDP
- UK services PMI
- ADP non-farm employment change
- ISM non-manufacturing PMI
Note: The ADP non-farm employment change is an estimated change in the labour market that is out 2 days before the government one. May or may not be indicative of the actual numbers.
Thursday (4/12)
- Australian retail sales
- Australian trade balance
- UK official bank rate
- UK MPC rate statement
- Euro minimum bid rate
- ECB press conference
- US unemployment claims
Note: Euro pairs usually drop during the press conference and a fall of 100 pips is normal. Shorting EUR/USD now would be a good option.
Friday (5/12)
- US non-farm employment change
- US trade balance
- US unemployment rate
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