Your forexlive.com ENewsletter

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• Australia – Fitch confirms AAA. Australia in the “9As club”
• China’s GDP figures: two reports you’ve got to see to believe
• Article: OECD Calls On Europe to Loosen Monetary Policy
• OECD upgrades its forecast for Japan’s Q1 GDP sharply higher
• North Korea missile launch sites said to show increased activity
• North Korea says to enter “state of war” against South Korea: KCNA
• Australia and China currency deal to boost exports
• Cyprus capital controls – what are they?
• Article: Investors wary of “slow panic” on growth after Cyprus rescue
• Hilsenrath: Fed’s favoured inflation measure ‘likely to reassure Fed officials’
• Italy – remains in political deadlock, no end in sight
• Cypriot bank customers ‘may never be paid back’
• Economists see better Q1 growth after consumer spending numbers
• Slight gain for USD/JPY in US trading
• U of Michigan consumer sentiment bucks the trend

Australia – Fitch confirms AAA. Australia in the “9As club” Posted: 29 Mar 2013 10:01 PM PDT Ratings agency Fitch has confirmed Australia’s AAA credit rating Australia is now one of only eight members of the “9As Club” – countries with the highly sought after AAA rating, with a stable outlook, from all three global agencies – S&P, Fitch and Moody’s. The Australian Treasurer, Wayne Swan, obviously is very happy: “… being an elite member of The 9As Club shows the resilience of Australia’s economy,” Mr Swan said in a statement on Friday. “No Liberal government has ever achieved this coveted trifecta from all three global ratings agencies.” Swan praises ‘gold-plated’ Aust economy

China’s GDP figures: two reports you’ve got to see to believe Posted: 29 Mar 2013 10:00 PM PDT Two studies cited in this article, one from the Federal Reserve in San Francisco, the other from the Federal Reserve in Dallas, each come to different conclusions about the veracity of Chinese GDP data. From the San Francisco Fed: The forecast of GDP growth from the end of 2009 to the end of 2012 based on the alternative indicators closely matched the official GDP growth rate reported by the NBS …  "We find no evidence that China's slowdown in 2012 was greater than officially reported." According to the Dallas Fed, though:  "China might have overstated its 2012 industrial production data to mask the economy's weakness. In other words, the slowdown in China could be worse than the official data indicate." Something for everyone there. Wall Street Journal

Article: OECD Calls On Europe to Loosen Monetary Policy Posted: 29 Mar 2013 08:53 PM PDT In its interim economic outlook (available here: OECD) issued this week the OECD called on major-economy central banks to 'strengthen or maintain' expansionary monetary policy to support economies, noting the fiscal constraints faced. Said inflation is low, so exceptional measures can and should remain or be pursued Stronger figures coming from the US, Japan and Germany, and some emerging economies OECD particularly pushed the ECB to do more to support demand (with monetary policy) WSJ article (gated) OECD Calls On Europe to Loosen Monetary Policy ADDED: The article is also available here (not gated): OECD Urges G7 Central Banks to Support Economies

OECD upgrades its forecast for Japan’s Q1 GDP sharply higher Posted: 29 Mar 2013 08:52 PM PDT The OECD said it expects Japan's economy to grow at 3.2% (annualized) in Q1 in its interim report on the outlook for G7 economies released this week. The prospect of further aggressive BOJ easing  has seen equities higher and yen lower … and "these have boosted the near-term growth and inflation outlook" More here

North Korea missile launch sites said to show increased activity Posted: 29 Mar 2013 05:52 PM PDT South Korea’s Yonhap news agency reported on Friday additional troop and vehicle movements at the North’s mid- and long-range missile sites, saying this indicates they may be ready to fire The report from Reuters notes "It was impossible to verify the report" Earlier: Nth Korea leader orders rocket units on standby to fire at US bases in the South and Pacific US B52 flights over Sth. Korea to "demonstrate deterrence"

North Korea says to enter “state of war” against South Korea: KCNA Posted: 29 Mar 2013 05:33 PM PDT Reuters report citing the North’s official KCNA (Korean Central News Agency) news agency : North Korea said on Saturday it was entering a “state of war” with South Korea in a continuing escalation of tough rhetoric against Seoul and Washington after coming under international sanctions for its nuclear test. Note: North and South Korea have been in a ‘technical’ state of war since 1950 because the conflict ended under an armistice and not a peace treaty. Earlier this month the North announced it was abandoning armistice and other bilateral peace pacts Graphic summarizing the state of armed forces on the Korean peninsula (click on graphic to make it larger) Source: News Ltd.

Australia and China currency deal to boost exports Posted: 29 Mar 2013 05:26 PM PDT Australian PM to go to China next week Set to sign deal enabling $A to be converted directly to Chinese yaun Australia becomes third country (after US and Japan) to have such convertibility in place Should reduce costs to business a little More details: PM set to sign China currency deal in boost to exporters

Cyprus capital controls – what are they? Posted: 29 Mar 2013 05:26 PM PDT No cap on amount credit or debit cardholders can spend domestically, within Cyprus A limit of €5,000 per month on purchases overseas Daily cash withdrawal limit of €300 Cashing cheques banned Travellers can take no more than €1,000 cash out of the country Controls are reviewed daily

Article: Investors wary of “slow panic” on growth after Cyprus rescue Posted: 29 Mar 2013 05:25 PM PDT This article from Reuters is well worth a weekend read: Investors wary of “slow panic” on growth after Cyprus rescue World markets have reacted calmly to the twists and turns of Cyprus’s financial rescue in the last fortnight but many investors fear the economic fallout is yet to come. Investors are worried that the precedents set for resolving a bank’s problems has pushed bank funding costs up Higher borrowing costs could lead to less lending to business, which is already “grappling with a recession and difficult credit conditions” The hit to savers in Cyprus may see “depositors in other countries withdraw money more quickly in the future if they hear of troubles in the banking system Reuters

Hilsenrath: Fed’s favoured inflation measure ‘likely to reassure Fed officials’ Posted: 29 Mar 2013 05:25 PM PDT Jon Hilsenrath is a reporter for the Wall Street Journal who, it is said (and I agree) has very close links into the Fed (he is sometimes described as the Fed’s “mouthpiece”). Hilsenrath is well worth paying attention to. Reporting Friday on “the inflation measure watched most closely by the Federal Reserve”, Hilsenrath says: The softness in the Commerce Department's personal consumption expenditure (PCE) index is likely to reassure Fed officials, who decided earlier this month to stick with their easy money policies. PCE in February was just 1.3% in February above the year-earlier levels, well below the Fed's 2% inflation target What does this mean for Fed policy? It is staying loose: The Fed has said its easy money policies are contingent on inflation remaining near the 2% goal. As long as the Fed's favorite price index is running so far below 2%, the central bank is encouraged to stick with these policies, which include an $85 billion per month bond buying program and keeping short-term interest rates pinned near zero. Fed's Favorite Inflation Gauge Shows Little Pressure

Italy – remains in political deadlock, no end in sight Posted: 29 Mar 2013 05:25 PM PDT A new round of talks led by President Napolitano failed to resolve the stalemate created by elections last month No group is able to form a government alone Napolitano conducted talks with the three main parties, but all remained in the “same entrenched positions they have occupied since the February 24-25 election, with no sign of movement from any of them” Reuters

Cypriot bank customers ‘may never be paid back’ Posted: 29 Mar 2013 05:25 PM PDT According to unnamed sources, Reuters reports that, those with >100,000 euro deposits at Bank of Cyprus: Will lose 37.5% of the cash, to be converted into shares in the bank, and “The rest of their big deposits may never be paid back” Approximately 22.5% of deposits over 100,000 euro will attract no interest Remaining 40% attracts interest but will not be repaid unless the bank ‘does well’ An official announcement is expected Saturday in Cyprus. Reuters

Economists see better Q1 growth after consumer spending numbers Posted: 29 Mar 2013 11:47 AM PDT Economists revised first quarter US growth forecasts higher after surprisingly strong consumer spending figures released Friday. Spending rose 0.7% in February compared to 0.6% expected and a 0.4% rise in January. The increased consumption was built on a 1.1% rise in consumer incomes which points to a sustainable increase in spending. Following the report Barclays raised its Q1 GDP forecast to 3.3% from 2.6% and and Macroconomic Advisers boosted their estimate to 3.5% from 3.2%.

Slight gain for USD/JPY in US trading Posted: 29 Mar 2013 11:16 AM PDT Nothing much to report in the way of market moves on a quiet holiday Friday but some upbeat data from the US led to a small amount of USD/JPY buying. The pair drifted about 10 pips higher to 94.20 in a move that is likely to continue in the new month. The main risk in the Bank of Japan meeting on Wed/Thurs. We expect the BOJ to increase asset purchases and re-jig current plans.

U of Michigan consumer sentiment bucks the trend Posted: 29 Mar 2013 10:46 AM PDT The final March Thomson Reuters/University of Michigan sentiment index advanced to a four-month high of 78.6. The reading smashed  the median forecast of 72.6 and the preliminary reading of 71.8. The strong number was especially surprising given the soft consumer confidence data last week. In general, the surveys follow the same trend. The February reading was 77.6. The numbers are sensitive to gasoline prices and after a sharp gain to start the year, the price of gas has edged lower.

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