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Economies of Note

Australia
As expected the Reserve Bank of Australia left rates on hold at 1.5% on Tuesday but as expected the main interest was around the accompanying statement. The RBA noted “An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”. This suggests a stronger link between appreciation in the A$ and the RBA’s economic forecasts. Further appreciation would no longer complicate; rather it “would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”.” We have thus seen a slide in the Australian dollar from a high on Tuesday at 0.8041 against the USD to a low for the week yesterday around 0.7912.  Read more

Economies of Note

Australia
We’ve seen some mixed data from Australia this week. Consumer Confidence made a good jump from 112.50 to 115.10, with the positive employment report of the previous week sighed as a factor. On the other hand we saw some soft inflation figures for the second quarter. Headline inflation came in at just 0.2% vs the expectation of 0.4%. The negative impact of the headline result was tempered by the RBA’s preferred inflation measure, the trimmed mean, which came in on expectation at 0.5%. Reserve Bank Governor Lowe was on the wires this week saying the central scenario remains for a gradual rise in underlying inflation. Read more

FX Update: The USD continues to struggle

Overview
Broad based USD weakness continued to be the main theme of last week. Political paralysis in Washington has weighed on the USD and until the market starts to believe the Trump administration can pass key legislation, it’s hard to see the United States dollar making a significant recovery. We do have the Fed Funds rate meeting this week, although it’s not expected to contain any surprises. While no change in interest rates is expected, we may get further clarity on impending balance sheet reductions from the central bank. Tighter monetary policy throughout much of the developed world is going to be the dominant trend over the coming years. The Bank of Canada recently raised interest rates for the first time in seven years, and the ECB are likely to decide later this year just when to scale back monthly bond purchases. Read more

Economies of Note

Australia
The Australian dollar has had another good week buoyed by upbeat minutes from the Reserve Bank of Australia, increasing gold and iron ore prices, and supportive local data. The RBA minutes had a definite positive tone to them noting economic data for the second quarter had generally been positive. The also highlighted improvements in the labour market and the fact that fiscal policy will be more expansionary in 2017/18 that previously thought. They said stronger infrastructure spending will have significant positive spill over to the economy. Yesterday’s employment data backed up their view with some solid figure. Although the headline gain of 14k was pretty much bang on expectation, digging into the detail showed full-time jobs grew by a whopping 62k, while part time employment declined 48k. Read more

FX Update: The USD suffers badly as data disappoints

Overview
The main theme of the past week has been broad based US dollar weakness. Dovish comments from Fed officials combined with soft US data have done the damage, but you can also add in the mix the continuation of Trump-Russia hysteria and its negative impact on the administration’s ability to push on with its policy agenda. Will this week be any different? Probably not on the political front, although there is always the chance of a data surprise. During this period of USD weakness the NZD has largely underperformed and as a result it has declined on many other crosses. The Australian dollar on the other hand has made the most of the current environment with gains across the board.  Read more

Economies of Note

Australia
The Australian dollar has made gains this week helped by some slightly better than expected second tier data. NAB business conditions and confidence both came in stronger than forecast, with business conditions now back to around pre-GFC levels and above the long run average. Westpac consumer confidence for July also improved printing at +0.4%. The index has a long way to go however as the three months prior to this saw consecutive declines. Overall the index isn’t giving great signals about the outlook for consumer spending. Yesterday we also saw the release of consumer inflation expectations from the Melbourne Institute which jumped from 3.6% to 4.4%. Next week should be more interesting with the RBA minutes set for release along with employment data. Read more

FX Update: Groundhog Day for most New Zealand dollar pairings

Overview
The G20 meeting over the weekend failed to have any dramatic impact on financial markets. The communique made it clear they are not all on the same page when it comes to climate change and trade, with the group issuing dissenting conclusions for the first time. Cracks between the US and the rest of the G20 could not be glossed over and the potential for a trade war on steel is certainly there. It looks like the US made very clear it’s concerns about the glut of Chinese steel and the final agreement mentioned “legitimate trade defence instruments”.  It also demanded concrete policy solutions by November from a G20 sub-body set up last year to examine steel market imbalances. US employment data on Friday highlighted the conundrum many western economies have found themselves in recently. Read more

Economies of Note

Australia
The Australian dollar was aggressively sold lower to 0.7570 after a dovish  RBA on Tuesday, as expected , left rates unchanged  retaining its neutral monetary policy stance and reiterated risks associated with a rising AUD. However it enjoyed a brief rally a day later heading back to the 0.7630 region But for the last two days has resumed its southward track, not helped by some pretty average June services PMI data out of China.  The Aussie remains under pressure now trading around 0.7578, not far from the weekly low set on Wednesday at 0.7570, this is despite strong local data released at yesterday which showed the local trade balance for May recorded a surplus of 2.471 billion in seasonally adjusted terms, more than doubling market’s forecast, helped by a sharp rebound in exports, up by 9% in the month. Read more

FX Update: The RBA to draw focus

Overview
A short week this week and lighter trading is expected with US markets closed for the July 4th Independence Day holiday tonight. However we also have a raft of economic data being released over the next few days, culminating in the US Non-farm payroll figure for June out on Friday night.  Also of note are the Fed minutes for the June meeting released on Wednesday, then the private payroll figure (ADP jobs report) coming out on Thursday. Away from the US, the RBA has its rate decision later this afternoon and a monetary report will be released by the ECB on Thursday. There is plenty of information to drive volatility on currency and equity markets. While the US Fed started its tightening cycle back several months , a point to watch is the more hawkish tone now emerging from some of the other Central banks, as a greater focus on financial stability risks emerges. Read more

Economies of Note

Australia
The Australian dollar ends the week in better form than at the start. It is now trading around 0.7682, after a 3 month high of 0.7686 overnight, up considerably from the week’s low of 0.7561, with the tone more positive and swinging to a “buy-the-dips” story helped by the firming iron price. Aussie fundamentals appear to be still a little mixed but jobs data released yesterday showed a further increase in vacancies, and this more positive tone should carry the AUD to threaten 0.7700 over the next few days. However US data next week will be critical to future direction and it will be hard for the AUD to extend much beyond the 0.7700 level ahead of the US Non-farm payroll figure next Friday. Read more