Daily Economic Outlook Wednesday, 28th July 2010

Economic Research
• Australia Q2 CPI was released overnight confirming our view that
inflation remains stubbornly high. A key driver of the headline result Markets
was a large increase in tobacco prices, associated with the 25% Currencies % change (on day)
increase in excise tax - although higher interest rates and health
€/$ 1.298 -0.09
costs also added to the increase in consumer prices. We believe that
£/$ 1.553 0.28
the detail of the inflation report is likely to be more influential than the €/£ 0.836 -0.37
headline result in determining whether the RBA will follow up with an £/€ 1.197 0.40
interest rate rise next week or hold fire until later in 2010. £/CHF 1.650 1.56
£/¥ 136.47 1.40
• After declining in May, US durable goods orders are expected to $/¥ 87.86 1.13
have rebounded, up 0.5% on the month in June. Conversely, we are Equities % change (on day)
looking for a moderation in durables excluding the volatile Dow Jones 10525.6 0.00
transportation component, as underlying demand remains muted. S&P 500 1112.7 -0.21
However, as demonstrated by the stronger than expected US home FTSE 100 5365.7 0.27
sales earlier in the week, we do not believe there will be any significant Nikkei 225 9496.9 -0.07
reaction to the result as investors await the advance estimate of Q2 DJ Eurostoxx 2767.4 0.88
GDP on Friday. The release of the Fed's Beige book is not expected to Commodities (US$) % change (on day)
Oil WTI, near-term future 77.40 -2.00
provide any 'new' information with the commentary reiterating the
Gold spot 1161.0 -2.01
dovish tone of the June FOMC minutes and Fed Chairman Benanke's
testimony last week.

• Elsewhere, the preliminary German CPI is expected to have risen by Interest rates (%) bp change (on day)
a modest 0.1% in July to be 1.0% higher than a year ago. This follows UK Official Bank Rate 0.50 0.0
annual inflation moderating to 0.8% in June. At July's ECB press 3-mth interbank 0.74 0.1
conference, Jean-Claude Trichet noted that some pick-up in price 2-yr swap 1.54 2.3
pressures were likely in the short-term. 5-yr swap 2.59 4.2
10-yr swap 3.53 5.5
UK 10-yr benchmark 3.52 6.3
Key data and events today US Fed Funds rate 0.25 0.0
Country Time Events Consensus Forecast Previous 3-mth Libor 0.48 -0.6
AU 02:30 Consumer prices, y/y (Q2) 3.4% 3.3% 2.9% 2-yr swap 0.84 1.6
SA 10:30 Consumer prices, y/y (Jun) 4.5% 4.6% 4.6% 5-yr swap 1.97 2.5
US 13:30 Durable goods orders (Jun) 0.8% 0.5% -0.6% 10-yr swap 3.04 2.3
US 13:30 Durable ex transportation (Jun) 0.5% 0.8% 1.6% US 10-yr benchmark 3.04 4.7
GE CPI - EU harmonised (Jul) P 0.1%(1.0%) 0.1%(1.0%) 0.0%(0.8%) EUR ECB policy rate 1.00 0.0
US Durable goods orders & Ex transportation 3-mth Euribor 0.83 0.4
US 5-year note auction, Fed's Beige Book 2-yr swap 1.50 2.9
PO Bank of Portugal publishes bank survey on credit market 5-yr swap 2.23 1.8
10-yr swap 3.01 0.1
Euro 10-yr benchmark 2.77 0.7
Japan Call rate 0.10 0.0
Key data and events over the week ahead 3-mth interbank 0.24 0.0
Day Country Event 5-yr swap 0.59 -0.3
10-yr JGB benchmark 1.06 -1.1
Thu 29 AU HIA new homes sales
BZ COPOM monetary policy meeting minutes
Prices taken at London close (approx); Swap rate quote conventions:UK - Semi, Actual/365
CA Industrial product price, Raw materials price index vs. 6M Libor; US - Annually, Actual/360 vs. 3M Libor; Euro - Annually, 30/360 vs. 6M Euribor.
CH Leading index Swap rates are quoted as Ask prices
EC Business climate indicator, Industrial, Consumer, Economic & Services
confidence Chart: Inflationary pressures in the pipeline in Australia
GE Unemployment rate
UK Net consumer credit, Net lending sec. on dwellings, M4 money supply
US Initial jobless & continuing claims, 7-year note auction 8 %

Average Weekly Earnings

Fri 30 AU Private sector credit
6
CA GDP
CH MNI business condition survey
4
EC Unemployment rate, CPI est. CPI
GE IFO July business climate survey
JN PMI, CPI, Jobless rate, IP, Housing starts 2
PO Base rate announcement
UK Nat'wide house prices, GfK consumer confidence survey
0
US GDP, Personal consumption, GDP, PCE, Employment cost rate, U. of
Michigan confidence PPI
Mon 2 EC PMI surveys -2
Jun-02 Jun-04 Jun-06 Jun-08 Jun-10
UK PMI survey
US ISM Manufacturing, construction spending
SK Consumer prices
Source: Thomson Datastream

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