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Australian Dollar Rises Against Majors
The Australian dollar strengthened against the other major currencies in the Asian session on Monday. The Australian dollar rose to nearly a 2-week high of 0.9544 against the Canadian dollar, from Friday's closing value of 0.9492. The aussie advanced to 87.79 against the yen and 1.5212 against the euro, from last week's closing quotes of 87.63 and 1.5258, respectively. Against the U.S. and the New Zealand dollars, the aussie edged up to 0.7247 and 1.0715 from last week's closing quotes of 0.7211 and 1.0674, respectively. If the aussie extends its uptrend, it is likely to find resistance around 0.97 against the loonie, 91.00 against the yen, 1.49 against the euro, 0.74 against the greenback and 1.09 against the kiwi.
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Fitch: Some Malaysia 2016 Budget Details Look Optimistic
Some of the detailed assumptions in Malaysia's 2016 federal budget look optimistic, posing some downside risk to the projections, Fitch Ratings says. Fitch expects Malaysia's fiscal and broader economic outlook to remain under pressure from weaker commodity prices into2016. Malaysia's 2016 federal budget projects a reduction in the deficit to 3.1% from 3.2% expected for 2015. The budget also estimates the share of revenues in GDP to drop by 1.1pp relative to 2015, dominated by a 0.9pp decline in the dividend expected from the state oil firm Petronas (to MYR16bn from MYR26bn in 2015). The authorities expect 2016 revenues to be buoyed by a 44% rise in receipts from the new Goods and Services Tax (GST) introduced in April 2015, or by 12.5%, consolidating the taxes it replaced. This is considerably faster than Fitch's expectation for nominal GDP growth of about 7% or nominal consumption growth of about 8%, despite a longer list of zero-rated items from next year. Slower growth in GST receipts in line with consumption would add about 0.1% of GDP onto the deficit, in Fitch's estimate. Overall, GST appears to have been much more significantly revenue-positive than the government originally expected. This could be partly because more businesses have signed up for the scheme than originally expected. The government estimates the deficit would be 4.8% in 2016 under the previous system of sales taxes. The government also projects spending to form a smaller share of GDP. The burden of adjustment falls on current expenditures (which the government terms "operating expenditures"). Government wages are expected to grow by just 2%, below Fitch's expectation for annual average inflation (2.5%). Recent experience gives grounds for caution that this tight settlement can be achieved. The government originally aimed to shave wages by 1.9% in 2015, but the revised budget expects wages will rise by 3.2%. Spending on supplies and services is also expected to contract. Delivering on these projections could be challenging, particularly as they would affect the livelihoods of some of the government's core supporters. Set against these issues, the budget's conservative oil price estimate of USD48/barrel is below Fitch's projection of USD60. This could point to some upside for oil-based revenues. This would partly be offset by higher subsidy payments, although the 2015 budget reduced fuel subsidies substantially. Fitch thinks the net effect of higher oil prices than the budget expects in 2016 is unlikely to be larger than 0.1% of GDP. Development expenditure (that is, capital spending) is projected at 4% of GDP in 2016, not much changed from 2015 (4.1%). However the government has typically found it difficult to execute the full development budget. Capital spending could provide a buffer in the event that there is slippage elsewhere in the budget, whether through "normal" under-execution or deliberate restraint. However, this would in turn weigh on broader GDP growth both in 2016 and in the future. It would also be difficult to square with the authorities' broader emphasis on infrastructure development. Fitch cited the authorities' success in insulating economic policy from intensifying political pressures when the agency revised the Outlook on Malaysia's 'A-' rating to Stable in June 2015. The proposed further reduction in the deficit is in line with this conclusion, although the budget also acknowledges political realities. The introduction of two new tax brackets for higher earners is redistributive, although the intention may have been more political than fiscal - the government estimates just 17,000 taxpayers will be affected, generating minimal expected additional revenue of MYR0.4bn. This does not quite cover a budgeted MYR0.7bn rise in transfers to lower-income households. The government also announced rises in minimum wages by between 11% and 15% in different parts of the country. Although Fitch thinks the federal budget deficit could exceed the 3.1% projection, the agency currently believes it is unlikely that the slippage would be enough to put Malaysia's debt ratio on an upward trajectory. Fitch expects Malaysia's federal debt to stay at about 52% of GDP until 2017. The evolution of non-budget contingent liabilities, including government guarantees, will bear monitoring. More broadly, the economy and sovereign credit continue to face challenges associated with shifting investor risk appetite, reflected in pressure on the currency and foreign reserves.
News are provided byInstaForex.
Fitch: Some Malaysia 2016 Budget Details Look Optimistic
Some of the detailed assumptions in Malaysia's 2016 federal budget look optimistic, posing some downside risk to the projections, Fitch Ratings says. Fitch expects Malaysia's fiscal and broader economic outlook to remain under pressure from weaker commodity prices into2016. Malaysia's 2016 federal budget projects a reduction in the deficit to 3.1% from 3.2% expected for 2015. The budget also estimates the share of revenues in GDP to drop by 1.1pp relative to 2015, dominated by a 0.9pp decline in the dividend expected from the state oil firm Petronas (to MYR16bn from MYR26bn in 2015). The authorities expect 2016 revenues to be buoyed by a 44% rise in receipts from the new Goods and Services Tax (GST) introduced in April 2015, or by 12.5%, consolidating the taxes it replaced. This is considerably faster than Fitch's expectation for nominal GDP growth of about 7% or nominal consumption growth of about 8%, despite a longer list of zero-rated items from next year. Slower growth in GST receipts in line with consumption would add about 0.1% of GDP onto the deficit, in Fitch's estimate. Overall, GST appears to have been much more significantly revenue-positive than the government originally expected. This could be partly because more businesses have signed up for the scheme than originally expected. The government estimates the deficit would be 4.8% in 2016 under the previous system of sales taxes. The government also projects spending to form a smaller share of GDP. The burden of adjustment falls on current expenditures (which the government terms "operating expenditures"). Government wages are expected to grow by just 2%, below Fitch's expectation for annual average inflation (2.5%). Recent experience gives grounds for caution that this tight settlement can be achieved. The government originally aimed to shave wages by 1.9% in 2015, but the revised budget expects wages will rise by 3.2%. Spending on supplies and services is also expected to contract. Delivering on these projections could be challenging, particularly as they would affect the livelihoods of some of the government's core supporters. Set against these issues, the budget's conservative oil price estimate of USD48/barrel is below Fitch's projection of USD60. This could point to some upside for oil-based revenues. This would partly be offset by higher subsidy payments, although the 2015 budget reduced fuel subsidies substantially. Fitch thinks the net effect of higher oil prices than the budget expects in 2016 is unlikely to be larger than 0.1% of GDP. Development expenditure (that is, capital spending) is projected at 4% of GDP in 2016, not much changed from 2015 (4.1%). However the government has typically found it difficult to execute the full development budget. Capital spending could provide a buffer in the event that there is slippage elsewhere in the budget, whether through "normal" under-execution or deliberate restraint. However, this would in turn weigh on broader GDP growth both in 2016 and in the future. It would also be difficult to square with the authorities' broader emphasis on infrastructure development. Fitch cited the authorities' success in insulating economic policy from intensifying political pressures when the agency revised the Outlook on Malaysia's 'A-' rating to Stable in June 2015. The proposed further reduction in the deficit is in line with this conclusion, although the budget also acknowledges political realities. The introduction of two new tax brackets for higher earners is redistributive, although the intention may have been more political than fiscal - the government estimates just 17,000 taxpayers will be affected, generating minimal expected additional revenue of MYR0.4bn. This does not quite cover a budgeted MYR0.7bn rise in transfers to lower-income households. The government also announced rises in minimum wages by between 11% and 15% in different parts of the country. Although Fitch thinks the federal budget deficit could exceed the 3.1% projection, the agency currently believes it is unlikely that the slippage would be enough to put Malaysia's debt ratio on an upward trajectory. Fitch expects Malaysia's federal debt to stay at about 52% of GDP until 2017. The evolution of non-budget contingent liabilities, including government guarantees, will bear monitoring. More broadly, the economy and sovereign credit continue to face challenges associated with shifting investor risk appetite, reflected in pressure on the currency and foreign reserves.
News are provided byInstaForex.
Fed under pressure to better manage rate expectations
As 2016 draws near, Federal Reserve officials and Chair Janet Yellen are under pressure to better manage market expectations for interest rates and the US economy. Policymakers are widely anticipated to announce short-term rates will remain near zero, leaving mid-December as their last chance to increase rates this year. That timetable poses two challenges for Fed chief to decide whether the US economy is ready for a rate hike, as well as signal their intentions without further confusing the market. Several investors criticized the mixed signals transmitted by central bank officials before and after the decision. In September, the Fed decided not to increase rates due to shaky economic conditions.
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Australia Inflation Gains 1.5% On Year In Q3
Consumer prices in Australia advanced 1.5 percent on year in the third quarter of 2015, the Australian Bureau of Statistics said on Wednesday. That missed forecasts for 1.7 percent, and was unchanged from the previous three months. Among the individual components, prices for education jumped 5.5 percent on year, followed by alcohol (5.0 percent), health care (4.8 percent), housing (2.7 percent), financial services (2.0 percent), furniture (1.8 percent) and recreation (1.1 percent). Prices for communications equipment shed 4.1 percent, while transportation was down 2.2 percent and clothing shed 1.0 percent. On a quarterly basis, inflation added 0.5 percent - also shy of expectations for 0.7 percent, which would have been unchanged from the three months prior. Among the individual components, prices for alcohol jumped 1.3 percent on quarter, followed by recreation and furniture (0.8 percent each), housing (0.6 percent), health (0.3 percent) and education (0.2 percent). Prices for communications equipment fell 2.0 percent and clothing was down 1.1 percent. The most significant price rises include international holiday travel and accommodation (+4.6 percent), fruit (+8.2 percent) and property rates and charges (+4.6 percent). The most significant offsetting price are vegetables (-5.9 percent), telecommunication equipment and services (-2.0 percent) and automotive fuel (-1.7 percent). Among the underlying trends, the Reserve Bank of Australia's trimmed mean was up 0.3 percent on quarter and 2.1 percent on year - slowing from 0.6 percent on quarter and 2.2 percent on year in Q2. The weighted median was up 0.3 percent on quarter and 2.2 percent on year, down from 0.5 percent on quarter and 2.4 percent on year in the three months prior.
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Eurozone Leading Index Remains Flat In September
A measure of future economic activity in Eurozone remained unchanged in September, survey figures from the Conference Board showed Wednesday. The Conference Board's Leading Economic Index, or LEI, for the euro area showed no variations in September, following a 0.2 percent increase in August. "The Euro Area Leading Economic Index was unchanged in September, and its six-month change has slowed in recent months, suggesting economic activity is unlikely to accelerate in the coming months," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "However, the stock market has recently rebounded and after last week's ECB meeting, the business investment climate may solidify, providing an opportunity for sustained growth in the Euro Area in 2016." The coincident index, which measures current economic activity, edged up 0.1 percent in September after remaining flat in the previous month.
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Germany-China ties unveil new venture
As German Chancellor Angela Merkel is keen on deepening relations with China, the country's largest exchange announced a new venture aimed at bolstering financial connections between the two countries. Deutsche Boerse AG and China Foreign Exchange Trade System, under the new venture, will host interbank products, as well as renminbi-denominated currency and interest rate trading. The largest economy in Europe is obtaining its latest turn at establishing its ties with the second biggest economy worldwide a week following Chinese President Xi Jinping stayed at Buckingham Palace. Deutsche Borse Chief Executive Carsten Kengeter said the new project will fuel continued growth of the country's markets and economies, and strengthen the significance of Europe as an RMB offshore hub as well. To be called China Europe International Exchange, it is scheduled to begin trading on November 18, with China Financial Futures Exchange and Shanghai Stock Exchange as the other two partners.
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Japan Inflation Flat On Year In September
Consumer prices in Japan were flat on year in September, the Ministry of Internal Affairs and Communications said on Friday. That matched expectations while slowing from 0.2 percent in August. Core inflation, which excludes the volatile costs of food prices, was down 0.1 percent on year. That was unchanged but beat forecasts for a decline of 0.2 percent. On a monthly basis, overall inflation added 0.1 percent while core inflation was flat.
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Commodity investors see the end of plunge
It took 21 months to overcome the decline following commodity prices plunged in 1997. After plummeting alongside the global economy in 2008, commodities touched the floor in only eight months. The Bloomberg Commodity Index has been declining for four years. The benchmark, from its most recent high in May 2011, is off by half and snapping its lowest levels of the 21st century. Investors are asking if the commodity prices have finally bottomed, and have expressed their woes the stock market is overhauled and bond prices are at risk of interest rate hikes. “I's top of mind for anyone looking at the market,” said Norbert Ruecker, Head of Commodities Research at Julius Baer. Many investors believe the plunge in commodities is over as prices are lower than the production cost. As a response, unprofitable producers are cutting back
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Treasuries Regain Ground Following Recent Pullback
After moving sharply lower over the course of the two previous sessions, treasuries regained some ground during trading on Friday. Bond prices drifted higher as the day progressed but pulled back off their best levels into the close. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.2 basis points to 2.151 percent. With the modest drop on the day, the ten-year yield pulled back off the one-month closing high set in the previous session. The rebound by treasuries came as traders went bargain hunting following the steep drop seen over the two previous sessions, which came in reaction to the Federal Reserve's monetary policy announcement. The Fed left interest rates unchanged as was widely expected, but the central bank's accompanying statement left open the possibility of a rate hike in December. Treasuries also benefited from the release of some disappointing U.S. economic data, including a report showing slightly smaller than expected upticks in personal income and spending. The report said personal income inched up by 0.1 percent in September after climbing by an upwardly revised 0.4 percent in August. Economists had expected income to rise by 0.2 percent. Personal spending also crept up by 0.1 percent in September after rising by an unrevised 0.4 percent in August. Spending had also been expected to climb by 0.2 percent. A separate report from the University of Michigan showed that consumer sentiment improvement by less than previously estimated in October. The University of Michigan said the consumer sentiment index for October was downwardly revised to 92.1 from 90.0, although it still came in above the final September reading of 87.2. Meanwhile, MNI Indicators also released a report showing that Chicago-area business activity unexpectedly expanded in the month of October. MNI Indicators said its Chicago Business Barometer jumped to 56.2 in October from 48.7 in September, with a reading above 50 indicating growth. The index has been expected to edge up to 49.2. Economic data may continue to attract attention next week, with traders likely to keep a close eye on the monthly jobs report due out next Friday. Ahead of the jobs report, trading could be impacted by reports on manufacturing activity, international trade, and labor productivity and costs.
News are provided byInstaForex.