Key highlights of the week ended October 16

Source: Dukascopy Bank SA
New Zealand
Even though low borrowing costs are likely to inflame the housing market, Reserve Bank of New Zealand Governor Graeme Wheeler hinted that further interest rate cuts were on table even as recent fundamentals have been more positive. Yet, Wheeler underlined that the central bank needed to have "sufficient capacity to cut interest rates if the global economy slows significantly". The comment on further easing being likely echoes Wheeler's wording in the monetary policy statement on September 10, where the central bank cut the official cash rate a quarter point to 2.7% for the third time in three months. The next review of interest rates is due on October 29, before the next full Monetary Policy Statement on December 10.

Euro zone
German investor confidence dropped to the lowest level in a year, as the diesel emissions scandal at Volkswagen and slowdown in emerging markets took their toll. The ZEW Center for European Economic Research said its index of investor expectations, which aims to foresee economic developments six months ahead, plummeted to 1.9 in October down from 12.1 in the previous month. That was the seventh straight decline and compared with economists median forecast for a drop to 6.5. Nevertheless, the German economy remains resilient, while solid growth in the US and other key export markets should balance the weakness in trade with China. Yet, the recent report on German inflation provided no relief for the ECB, who have been struggling to revive inflation in the Euro zone. German consumer prices declined 0.2% on month in September, while in annual terms, consumer inflation was flat in September.

UK
The UK jobless rate dropped to the lowest level in seven years in August, while proportion of people in employment rose to the highest level since records began in the 1970s. The unemployment rate came in at 5.4% for the three months through August, compared with 5.5% in the three months to July, as the number of unemployed people dropped by 79,000 to 1,77 million. The Office for National Statistics reported employment surged by 140,000 over the period, increasing the number of people in work to 31.12 million. The employment rate also reached a record high of 73.6%. While the decline in consumer prices boosted consumers' purchasing power, Britons also enjoyed growth in wages, which rose 3%.

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