September 2, 2019

Market Outlook

Equities markets were relatively unchanged on Friday as the US dollar pushed higher. The Aussie dollar begins the week trading close to 10—year lows. Continuing Greenback strength has seen the Kiwi dollar and the Euro drop to 4-year and 2-year lows respectively.

Week Ahead

Key economic releases from across the globe this week include: Australia: The RBA will decide on monetary policy, Q2 GDP numbers, trade balance and retail sales; US: with jobs report, ISM PMIs, trade data, and factory orders; UK: Manufacturing and Construction PMI, Retail Sales numbers and Consumer Inflation Expectations are all released; Eurozone: Eurozone retail trade; Germany factory orders and industrial output; Rest of the World: Japan household spending; China Caixin PMIs; and Canada will be deciding on monetary policy.

AUD

The Aussie dollar could be pressured this week as Wednesday’s GDP figure will shine more light on the current state of the Australian economy. It’s clear that Australia dollar is currently experiencing somewhat of a turbulent time and with economic releases this week in the form of Retail Sales numbers, the RBA Rate Statement on Tuesday and GDP numbers, you can be sure to expect movement in the currency. Last quarter’s annual GDP reading printed at 1.8%, which was the lowest rate since the GFC.

USD

The US dollar continues to strengthen against a basket of currencies as it benefits from being the safe haven of choice and having the highest interest rates out of nations in the developed world. Data from the States last week was mixed with the dollar remaining strong even with the downgrade of US second quarter GDP last Thursday which showed that the US economy had only grown by 2 rather than the expected 2.1% figure. Consumer Sentiment also fell to 89.8 versus a preliminary figure of 92.1. This was attributed to trade tensions. With the US economy slowing and the Fed cutting interest rates for the first time since 2008 last month, and more cuts on the horizon, why is the dollar still strengthening? The US economy is still considered more secure than others especially with the UK experiencing a troubled divorce from Europe and the Eurozone on the brink of a recession.

GBP

The downside risk for the Great British Pound has increased following PM Boris Johnson’s successful move to suspend Parliament for five weeks. With approximately two months until the Brexit deadline the prospect of the UK leaving Europe without a deal continues to ‘spook’ financial markets pushing the Pound lower. As the deadline approaches for Brexit, investors are preparing for large currency swings as the Pound once again finds itself under 1.22 versus the US dollar with some results suggesting a handle of 1.10 or lower if a deal cannot be formed. GBP continues to be moved around against a basket of currencies and has lost most of its recent dominance against the Aussie dollar which saw the Pound push close to GBP/AUD 1.90 (AUD/GBP 0.5260) at the beginning of May this year. Data out this week from the UK includes Manufacturing and Construction PMI, Retail Sales numbers and Consumer Inflation Expectations.

EUR

Eurozone inflation came in weaker on Friday pushing the Euro lower and the Aussie-Euro cross to the highest reading in a month. The Euro has been dogged recently due to consistently poor data and it appears that the region is on the brink of a recession. German Retail Sales numbers came in lower than expected for the month of July and CPI data also missed the market expectation of 1% only printing 0.9%. Key data on the European docket this week will see the release of Eurozone retail trade; Germany factory orders and industrial output.

Rest of the World

China’s factory activity contracted in August for the 4th consecutive month to 49.5 from the previous figure of 49.7. This was attributed to the Trade War tensions between China and the US along with slow domestic demand. Canada will feature heavily this week in terms of data releases. Data has been improving lately with monthly Retail Sales and GDP printing better than expected. The latest round of data to be released this week includes the BOC Rate Statement, Current Account figures, Employment numbers and Trade Balance. Traders have increased bets on the BOC cutting rates this week which has limited any upside moves for the Loonie (CAD).

Event Wrap

Monday

AUD – AIG Manufacturing Index

AUD – Company Operating Profits (Quarterly Figure)

AUD – MI Inflation Gauge

AUD – Commodity Prices

NZD – Overseas Trade

CNY – Caixin Manufacturing PMI

GBP –Manufacturing PMI

USD – Bank Holiday (Labour Day)

CAD – Bank Holiday (Labour Day)

Tuesday

AUD – Retail Sales

AUD – Current Account

AUD – Cash Rate

AUD – RBA Statement

USD – Final Manufacturing PMI

CAD – Manufacturing PMI

EUR – PPI Figure

GBP – BRC Retail Sales Monitor

GBP – Construction PMI

Wednesday

NZD – GDT Price Index

NZD – ANZ Commodity Prices

AUD – AIG Services Index

AUD – GDP (Quarterly Figure)

CNY – Caixin Services PMI

GBP – Services PMI

GBP – Retail Sales

EUR – German Final Services PMI

CAD – Trade Balance

USD – ISM Manufacturing PMI

USD – Trade Balance

Thursday

CAD – BOC Rate Statement

USD – Beige Book

AUD – Trade Balance

USD – ADP Non-Farm Employment Change

USD – Final Service PMI

USD – Unemployment Claims

CAD – Current Account

EUR – German Factory Orders

Friday

AUD – AIG Construction Index

NZD – Building Consents

USD – Crude Oil Inventories

USD – Factory Orders

USD – ISM Non-Manufacturing PMI

USD – Unemployment Rate

USD – Non-Farm Employment Change

USD – Average Hourly Earnings

GBP – Consumer Inflation Expectations

EUR – German Industrial Production

EUR – Final Employment Change (Quarterly Figure)

EUR – Revised GDP (Quarterly)

CAD – Employment Change

CAD – Unemployment Rate

 

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