August 26, 2019
Equities markets retreat as the US-China trade war escalates with both sides unveiling fresh tariffs on each other. Safe haven currencies were the major benefactors of the unexpected trade war drama. Fed Reserve Chair Powell’s address was slightly downbeat and overshadowed by the events between China and the US.
Key economic releases from across the globe this week include: Australia: Building Permits, Private Sector Credit and RBA Deputy Gov. Debelle Speaking; US: Second Estimate of Q2 GDP growth will be keenly watched alongside Personal Income and Outlays, PCE price Index, and Durable Goods Order; UK: MPC Member Tenreyro Speaks, Gfk Consumer Confidence, Net Lending to Individuals and Mortgage Approvals are all released; Eurozone: Eurozone Flash Inflation, German IFO business Climate and the Jobless Rate are in focus; Rest of the World: Japan Consumer Confidence, Industrial Output, and Retail Sales; China NBS PMIs; and Canada and India release Q2 GDP growth rates.
The Aussie dollar nears 10 year lows this morning against several currencies following Friday’s fresh round of trade war tariffs. Data is light this week out of Australia with the only top tier economic releases coming in the form of Building Approvals, Private Capital Expenditure and Reserve Bank Deputy Governor Debelle speaking tomorrow. Investors will look to data out of the US this week in the form of preliminary GDP and Consumer Confidence numbers to dictate the AUD/USD cross. The latest round of trade war tariffs between China and the US does nothing but heap pressure on a globally exposed currency like the Australian dollar as investors seek safety in the Japanese Yen and US Dollar following the trade war spat.
Jerome Powell’s address at the Jackson Hole Symposium was slightly subdued and somewhat overshadowed by fresh tariffs imposed by China and the US. Powell commented that the domestic economy was in a “favourable place” and that inflation was tracking closer to the Fed’s 2% target figure. He acknowledged that the US economy still faces significant risks, but his address was overshadowed by China announcing tariffs to the tune of $75 billion on US imports. This sparked a tit-for-tat response from President Trump which will see a 25% tariff on $250 billion in goods from China rising to 30% starting October 1st. Data from the US this week features second estimate of Q2 GDP growth, personal income and outlays, PCE price index, and durable goods orders.
GBP gained ground last week against the Aussie dollar as Boris Johnson met German Chancellor Angela Merkel. Merkel suggested that a solution to the Irish border issue could be found before Britain leaves the European Union on Oct. 31 lifting the Pound 1.4% against the Aussie dollar. AUD/GBP is now at its lowest level since July. However, the Pound retraced this morning on the back of comments made by UK PM Boris Johnson over the weekend who stated to the BBC News channel that the chances of the UK leaving the EU without a deal are now “touch and go.” The Pound had experienced its best day of trading in the European markets in over three months on Friday amidst renewed hopes that an agreement could be reached.
AUD/EUR has fallen over 50 basis points nearing ten-year lows. Italian politics currently remains the key focus in Europe with Italian president Sergio Mattarella giving his parties until Tuesday to find a new government. The parties have informed Mattarella that more time is needed to solve the ongoing government crisis following the resignation of former Prime Minster Giuseppe Conte last week. Key data this week from the Eurozone includes Flash Inflation, German IFO business Climate numbers and the Jobless Rate.
Rest of the World
The Kiwi dollar was a big mover last Friday, jumping from a three and-a-half-year low after the New Zealand Central Bank stated they are “pleased” with where interest rates currently sit. This dampens expectations of further rate cuts to follow recent aggressive easing. The Brazilian Real fell to 1-year low on Friday following the escalation in the China-US trade war.
NZD – Trade Balance
EUR – German Ifo Business Climate
GBP – Bank Holiday
USD – Core Durable Goods
* G7 Meeting – All Day
AUD – RBA Deputy Gov. Debelle Speaks
USD – FOMC Member Bullard Speaks
EUR – German Final GDP (Quarterly)
GBP – MPC Member Tenreyro Speaks
AUD – Private Capital Expenditure
AUD – Construction Work Completed
GBP – Nationwide HPI
EUR – M3 Money Supply
USD – Consumer Confidence
AUD – Flash Manufacturing PMI
AUD – Private Capital Expenditure
NZD – ANZ Business Confidence
JPY – Consumer Confidence
USD – Prelim GDP
USD – Goods Trade Balance
USD – Unemployment Claims
CAD – Current Account
EUR – German CPI
EUR – German Unemployment Change
AUD – Building Approvals
AUD – HIA New Home Sales
AUD – Private Sector Credit
NZD – Building Consents
USD – Personal Spending
USD – Core PCE Price Index
USD – Chicago PMI
GBP – GfK Consumer Confidence
GBP – M4 Money Supply
GBP – Mortgage Approvals
GBP – Net Lending
EUR – CPI Flash Estimate
EUR – Unemployment Rate
EUR – German Retail Sales
CAD – GDP
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