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Economies of Note

Australia
We have only had some minor second tier data released from Australia this week and it’s had little effect on the markets. The CB leading index increased 0.5% up from 0.4% prior, while construction work done disappointed printing at -0.7% vs -0.5% expected. The Australian dollar has struggled to maintain a firm footing this week undermined by Moody’s downgrade of China on Wednesday and soft commodity prices. It heads into the end of the week feeling a little soggy. Next week’s data will be of more interest with building approvals, private capital expenditure and retails sales all set for release.  Read more

FX Update: Commodity recovery helps drive NZD and AUD higher

Overview
A quiet open to the week with little economic news and with President Trump “on-tour” the bad news eroding USD confidence has temporarily taken a back seat. US stocks rose for the third day boosted by President Trump’s trip to Saudi Arabia that saw trade deals announced across the defence, energy and infrastructure sectors, lifting industrial shares such as Boeing, Raytheon and 3M. Crude pushed to a one-month high before OPEC meets later this week. A more “risk-on” tone is now evident in financial markets, returning after political turmoil on a daily basis in Washington rattled investors and saw stocks have some the biggest declines since last September.  Read more

Economies of Note

Australia
Data and news out later in the week was better for Australia and saw the Australian dollar rise over the old AUD/USD resistance level of 0.7400 soaring to a high of 0.7465 yesterday. On Wednesday, ratings agency Standard and Poor’s confirmed Australia’s AAA credit rating, however it continued to leave the nation on negative watch, and suggesting that  the Turnbull government may struggle to return to surplus by the forecasted date of 2020-21. Also positive and unexpected was yesterday’s fall in the April unemployment rate to 5.7% its lowest level in four months, expectations had been for a figure steady around 5.9%.  Read more

FX Update – US data mixed, while equities trade like they don’t have a care in the world

Overview
Markets traded sideways with little direction on Friday awaiting the US CPI and retail sales data. When released the results were mixed; CPI figures rebounded for April (up 0.2%) although year-on-year at 2.2% lower than an expected 2.3%. April retail sales were lower than forecasted, up 0.4% (expected 0.6%) raising some concerns that Q2 is not seeing continuing positive momentum.  With confidence knocked on the data release, US equities and the US dollar moved lower as speculation weakened around the odds of a June Fed rate hike. However it should be pointed out that the numbers weren’t that bad, they just failed to be as good as anticipated and we believe that the Fed is still on course for a June rate hike.  Read more

Economies of Note

Australia
As we expected there was little discernible market reaction to the Australian Federal Budget, other than the reduction in banking stocks suffered as news of the new tax leaked out earlier in the day. Rating agencies will now be casting an eye over the underlying cash balance projections to see how robust these projections are, it is equally unclear how they will see the new bank tax and what it means for growth and risk. Earlier today Moody’s rating agency noted that although the budget supported their assessment of Australia’s high fiscal strength, the deficit would likely to be wider than the Australian government expects. They also commented that they believed revenues would not rise as fast as the government forecasted and that expenditure would remain higher than that budgeted. Read more

FX Update: Europe breathes a sigh of relief after Macron’s win

Overview
There was an air of general relief by financial markets, with geopolitical risks easing, as polls for once were proved correct and the French Presidential election was won by centrist, pro-business, pro-European Emmanuel Macron in a convincing manner. Although this result was somewhat built into pricing, there was a rally in the EUR on Monday, but this was short lived as attention focused on whether Macron and his fledgling En Marche movement will be able to win a majority in the legislative elections in June. If he does not, this will limit any reforms that he has proposed to make the French economy more efficient and lower unemployment, curtailing his effectiveness as President.  Read more

Economies of Note

Australia
As expected the RBA left rates on hold at its Tuesday meeting. Rates have remained at a record low 1.5% since last August. Economic data continues to be mixed with unemployment stubbornly high at 5.9%, retail spending weaker and inflation remaining at near record lows. In a speech presented yesterday by the RBA Governor he commented that the key risk to the economy from any fall in house prices or rising interest rates, is what might happen to consumer spending. Read more

FX Update – NZ data this week should support the Kiwi dollar

Overview
Geopolitical risks continue to outweigh economic factors as market drivers, with the French elections, North Korea and US political machinations all contribution to the mix. The final poll for the French Presidency will be this Sunday and although the centrist candidate Macron is now expected to win, there remain a large number of undecided votes and right wing, anti-Euro Marine LePen has run a solid campaign. Look for choppy European markets in the run-up to the weekend. Read more