rob_podcast

httpvh://www.youtube.com/watch?v=h3asLHbNciI

Revolutions in Africa & the Middle East overthrow equity markets.

Safe haven currencies buoyed by African & Middle East tensions.
Inflation remains on one side of the Atlantic.
Data vacuum locally, though BHP posts record profit.

Safe haven currencies have been saved from themselves by turmoil in Africa, as Libya joins the queue for democratic reform. Both the JPY & USD were on a downward trend this time last week as low inflation and low productivity continued to persist. However, as the domino effect of citizens overthrowing dictators continued we’ve seen increased demand for these safe haven currencies. Libya’s Colonel Gaddafi has ordered the military to fire on citizens to crush an uprising with the resulting civil unrest attaching risk to oil supply, pumping US crude higher to $96 a barrel. Overnight US equity markets fell more than 2%, partially assisted by poor earnings from Wal Mart and a significant write-down by Bank of America. The Aussie however is showing resilience to sustain parity against the Greenback despite equities finishing lower as weak growth prospects in the US are making .98 or even .99 levels difficult to sustain.

To continue the theme of weak growth prospects in the US, economic data in the UK has highlighted a rebound in some key areas of their economy relative to the States. The US data flat-lined this week with the only redeeming feature being the Philadelphia Fed Manufacturing Survey (35.9), Richmond Fed Manufacturing Index (25) and Consumer Confidence (25). The UK had some better numbers with Retail Sales (5.3%) reflecting a more confident consumer while Public Sector Net Borrowing (-£5.25B) highlights the recent fiscal conservatism that has got the country’s finances in shape. This reaffirms the UK 2011 growth theme and Mervyn King will have little option but to raise rates in May.

It’s been a data vacuum locally this week, with the key pieces being the record profit result from BHP Billiton and some hawkish signals from the RBA. First-half profit rose 72% off the back of demand for iron ore from China with reports that larger profits will continue to be achieved for the foreseeable future. The RBA provided some fresh colour on the local unit and inflationary pressures when Philip Lowe mentioned that there will be a “change in relative” commodity prices that will be “quite persistent”. This forecast prosperity was continued by the RBA Governor who followed on Wednesday saying that “with a large boost to income, we need to think about the balance between saving and spending”. Clearly inflationary pressures will be a common thread in Australia for the medium term.

Visit our homepage  for more information on how we can help you with your foreign exchange requirements.