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15 Dec 2014
The day ahead in AUD and Yen land - Westpac
FXStreet (Guatemala) - Having noted the Abe victory as widely expected and a firer Yen on the back of risk aversion else where, Sean Callow, analyst at Westpac Banking Corporation ABN looks to the day ahead.
Key Quotes:
“The Australian government will release its Mid-Year Economic and Fiscal Update (MYEFO) at 12:30pmSyd/9:30am Sing/HK. As usual, the government has provided guidance to media about the deterioration in the budget bottom line and potential new policy steps, so there should be few real surprises and thus limited market response”.
“Treasurer Hockey seems set to argue that wider deficits in the current and forecast years are due to a steep fall in the terms of trade (mostly the iron ore price), which cuts company tax profits and thus government receipts, plus the Senate’s rejection of various measures proposed in the May budget”.
“Note that the expected iron ore price projection of $60 is the export price, which is lower than the spot China price, which includes freight. Hockey has said new measures at the MYEFO will have little impact on Australia’s economy, including another round of cuts to the foreign aid budget”.
“Westpac looks for the 2014/15 deficit projection to be revised from –A$30bn to -$40bn (-2.5%/GDP) and deficits through 2017/18 (-1.0%/GDP, previously -0.2%)”.
“Growth forecasts should be little changed. Ratings agencies have indicated no particular concern over Australia’s AAA rating given low net debt around 14%/GDP. AUD should not show a sharp reaction but the headlines will not help fragile consumer sentiment and leave intact RBA rate cut pricing”.
“At 10:50am Syd/7:50am the Bank of Japan releases the Dec Tankan business survey. Consensus is for no change in the headline large manufacturers diffusion index, at +13. This compares to a 20 year average of -3”.
“The survey of expectations for USD/JPY in FY2014/15 should remain well below the spot rate”.
Key Quotes:
“The Australian government will release its Mid-Year Economic and Fiscal Update (MYEFO) at 12:30pmSyd/9:30am Sing/HK. As usual, the government has provided guidance to media about the deterioration in the budget bottom line and potential new policy steps, so there should be few real surprises and thus limited market response”.
“Treasurer Hockey seems set to argue that wider deficits in the current and forecast years are due to a steep fall in the terms of trade (mostly the iron ore price), which cuts company tax profits and thus government receipts, plus the Senate’s rejection of various measures proposed in the May budget”.
“Note that the expected iron ore price projection of $60 is the export price, which is lower than the spot China price, which includes freight. Hockey has said new measures at the MYEFO will have little impact on Australia’s economy, including another round of cuts to the foreign aid budget”.
“Westpac looks for the 2014/15 deficit projection to be revised from –A$30bn to -$40bn (-2.5%/GDP) and deficits through 2017/18 (-1.0%/GDP, previously -0.2%)”.
“Growth forecasts should be little changed. Ratings agencies have indicated no particular concern over Australia’s AAA rating given low net debt around 14%/GDP. AUD should not show a sharp reaction but the headlines will not help fragile consumer sentiment and leave intact RBA rate cut pricing”.
“At 10:50am Syd/7:50am the Bank of Japan releases the Dec Tankan business survey. Consensus is for no change in the headline large manufacturers diffusion index, at +13. This compares to a 20 year average of -3”.
“The survey of expectations for USD/JPY in FY2014/15 should remain well below the spot rate”.