The stand-off continues. Share prices pushed higher. Significantly for some traditional analysts, the Dow Jones Transportation Index surpassed recent highs. Commodity prices were up.
The ‘risky’ currencies such as the NZD, AUD and HUF appreciated and the low-cost JPY depreciated. All signs of a greater appetite for risk. And yet the currency moves remain unconvincing (the NZD edged up to a new high at 66.28c but not so the AUD, CAD, EUR or GBP – likewise for a wider set of risky assets), while the general risks around economic growth and company profits remain high. I still believe these are good opportunities for people looking to sell but a very risky time to be buying.
This week sees the RBNZ once again decide on the Official Cash Rate. No change to the 2.5% current rate is expected. The RBNZ appear caught between a rock and a hard place (as usual): they will be concerned that a rising NZD will curtail any export pickup but they will not want to fuel any faster housing recovery by reducing the cash rate.
The net effect may be to prompt the Governor to warn about the need for restraint with debt accumulation, and to state the RBNZ’s willingness to consider more direct means to slow credit growth in future.