Recap 3-14-13


Thing have been fairly quiet macro land for a while. One of the more interesting items over the past 24 hours is the surprising jump in the Australian employment. The surprise drove a decent repricing of RBA expectations – further cuts are no longer expected through 3Q, and some hikes are actually priced in further out. The employment figures were a bit surprising because other indicators such as business confidence, manufacturing PMI, and both Chinese data and stock prices have been sub par to middling at best.

IMO, the price action is probably better explained by positioning and US markets than the data itself. Being bearish Australia has been in vogue in the macro community for around a year now, and speculators have reduced their Australian dollar exposure significantly over the past few weeks. Meanwhile, US yields have been gradually rising for some time now, which has reduced the safe haven bid for sovereign debt in the commodity exporting countries. As a result, the squeeze could plausibly continue a bit further. But with the PBoC no longer dovish, and the RBA vigilant against a stronger AUD, fading this move is likely to prove attractive. As the RBA continues to believe that Australia is near or just past the peak in resource investments, and the trade weighted AUD >20% above ‘equilibrium,’ actual hikes in the foreseeable future appear quite unlikely.

Separately, there was an interesting BBG profile of Kuroda today.

  • The future governor is a devotee of the late U.S. economist Irving Fisher, whose views on the dangers of deflation helped shape Kuroda’s conviction in the reflationary power of money- printing. “During the Great Depression, Fisher argued that the most serious problem of deflation is to make real debt mushroom and damage the whole economy,” Kuroda said in an interview last month before his BOJ nomination. “So I have long advocated aggressive monetary easing to eradicate deflation in Japan.”
  • Kuroda’s reflationary views hardened in the 1990s, said Kawai of the development bank’s research institute. During that period, “he felt monetary policy support was inadequate,” Kawai, who worked for Kuroda at the finance ministry and the development bank, said in an interview last month. Kawai said his former boss, a fluent English speaker, would regularly read blogs by influential academic thinkers including anti-austerity economist Paul Krugman.
  • In 2002, while they were both at the finance ministry, Kuroda and Kawai wrote an essay in the Financial Times entitled “Time for a Switch to Global Reflation.” They called for Japan to adopt a 3 percent inflation target and “innovative, non- traditional anti-deflationary policies.”
  • “He was never very comfortable with people-to-people development challenges, he was more comfortable on the macro side,” said Curtis Chin, U.S. ambassador to the development bank from 2007 to 2010 and now a Bangkok-based senior fellow at the Asian Institute of Technology. “You saw him less engaged visiting projects than you would at a big conference speaking economics.”
  • He struggled as a young bureaucrat on a climb with officials and journalists up a 1,500-meter (4,900-foot) mountain in NaganoPrefecture, to the west of Tokyo, according to Utsumi, now president of Japan Credit Rating Agency Ltd. Kuroda “got exhausted and said he’d never do it again,” he said. “He’s not the sporty type.”


  • US Jobless Claims declined to 332k last week vs 350k exp and 340k prev.
  • US Core PPI declined to 1.7% in Feb as exp vs 1.8% prev
  • Australia Employment jumped 71.5k in Feb vs 10k exp and 10.4k prev, as part time Employment surged. This kept the Unemployment rate at 5.4% vs 5.5% exp, despite a surprising increase in the participation rate to 65.3% from 65.0% prev.
  • Canadian House growth slowed to 2.2% YoY in Jan vs 2.3% exp and prev
  • Japan – encouraging sign for inflation – Japan’s top industrial labor unions won their biggest annual compensation gains in years – WSJ

Upcoming Data:

  • Thu : Canada New Housing Price Index, US Jobless Claims,
  • Fri : EU CPI, US Empire Mfg
  • Mon : US NAHB Index
  • Tue : UK CPI, German Zew, US Housing Starts
  • Wed : BoE Minutes, FOMC, UK Jobless Claims, Japan Trade Balance, China HSBC Flash Mfg PMI