fxmatters

The NZ economy has probably just experienced a recession, and slow domestic demand growth will make things tough in the second half as well. The next step is a less inflation pressure … Read Expecting the RBNZ to ease

• July – the S&P500 Index has dropped in 7 of the last 10 years, by an average 1.6% per month.
• Second half of year – EUR/USD has gained in 7 of the last 10 years, by an average of 4.3% per half.
• 2 July 1997 – Thailand devalues the baht, setting in train a domino affect on other Asian currencies.

This week we will be a little wiser as to whether we are in recession or not. We won’t actually know for sure but at least we will find out whether NZ output declined in the March quarter (we will have to wait until September to find out what happened in the almost-finished June quarter). The odds are that we have just experienced six months of recession. March quarter output is widely believed to have declined by 0.3%, and the June quarter appears to have been worse … Read After GDP

• 27 June 1857 – Scientific America warns “the whale oil which hitherto have been much relied on in this country to furnish light and yearly become more scarce, may in time almost entirely fail”. Prices did rise sharply from 43c per gallon to US$2.25 between 1823 and 1866 but whale oil was quickly replaced by kerosene.
• 27 June 1878 – Japan adopts new currency system based on yen.

• 22 June 1972 – the UK imposes controls on the exchange of sterling and floated the currency, effectively ending the sterling area (which had former British Empire countries either using sterling or pegging their currency to sterling). NZ was one of 45 countries to leave the sterling area the next day, allowing their currencies to fluctuate independently of the GBP (the NZD being fixed to USD at the time).

Just when it looked like the USD was on the ropes again, the referee came to the rescue with a warning that the US want a strong currency. And where the USD goes sets the platform for smaller currencies like the NZD … Read Feeding exchange rate habits

• 7 June 1956 – Sir Thomas Gresham lays the cornerstone of England’s Royal Exchange in London. London today is still the major fx centre.
• 5-10 June 1967 – Arab-Israel six-day war that shaped the current Israel. And 7 June 1981 – Israel bomb an Iraqi nuclear reactor. Now Israel again threaten to attack Gaza—and also Iran (albeit a threat largely due to internal politicing).

The one clear trend at present is higher oil prices. But different central banks are coming round to different views about the consequent inflation risk … Read NZD falling, AUD rising

• 2 June 1956 – “the instability of the economy is equaled only by the instability of the economists,” writes Harvard Professor John Williams in the New York Times.
• 2 June 1987 – Paul Volcker resigns as chairman of the US Federal Reserve Board, to be replaced by Alan Greenpan.
• 5 June 1933 – US creditors can no longer demand payment in gold.

We have come to a busy week. There are any number of events that could cause a sharp currency reaction, in either direction. And then there is the oil price
… Read The oil impact