Forex Investment and Currency Trading

1Q08 GDP growth was stronger than expected, but at 10.6% yoy was a slowdown from the 11.2% performance in 4Q07. The moderation was attributed to continued macro-tightening policy and emerging signs of weaker global demand. Understandably, net exports declined significantly due to weaker external demand, faster CNY appreciation and robust import growth. Having said that, economic momentum remained strong, supported by the brisk fixed asset investment growth at 24.6% yoy and steady domestic
consumption performance at 12.5% yoy. In addition, March industrial production rebounded to 17.8% yoy from 15.4% in February, though there are signs that this could be peaking in [...]

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Despite rising energy costs, a second consecutive subdued core consumer inflation reading in March indicates that the slowing economy is reducing business pricing power and helping to keep inflation in check. While the Fed remains concerned about inflation developments, the recent trend gives it somewhat more flexibility to ease policy as necessary to support the weak economy amid continued difficult credit conditions.
The overall consumer price index rose 0.3% (0.343% to 3 decimal places) in March, matching the median of analysts’ forecasts (according to Bloomberg). Year-over-year headline inflation remained at 4.0% for a second consecutive month, ensuring that inflation pressures remain [...]

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In the previous two New Zealand recessions, falling house prices detracted significantly from annual CPI inflation. Today, the NZ housing market is already on the edge of deflation. House prices could fall as much as 30% from peak to trough. Even on conservative estimates, such a fall in house prices would knock more than 1 percentage point off annual CPI inflation and reinforces the view that the Reserve Bank of New Zealand (RBNZ) will be forced into easing rates sooner and more aggressively than the 90bps of cumulative cuts the NZ interest rate market is discounting over the next 12 months. [...]

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Inflation in Brazil represents a growing challenge for Banco Central do Brasil (BCB), even though IPCA inflation is closer to its target relative to many Emerging economies where inflation is more dramatically exceeding targets. The market implication is for a 25bp hike in rates at the April 16 meeting and a move lower in USD/BRL to 1.65. The targeted IPCA inflation index gained 0.49% mom during February – above expectations for a 0.45% gain. The monthly advance also contributed to pushing yearly inflation to 4.61% yoy from 4.58% in the previous month. Annual inflation has now exceeded the 4.50% central [...]

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