September 17, 2019

Market Outlook

An attack on a Saudi oil facility over the weekend has spooked financial markets. Crude oil has appreciated 14% this morning as a result of the attack instigated by rebels in Yemen. Currencies linked to oil-exporting nations such as Canada and Norway have been affected the most. The Aussie dollar remains buoyant against the Greenback and is offered close to six-week highs currently. Central banks take the spotlight this week providing updates in relation to monetary policy with the Fed Reserve expected to cut rates.

Week Ahead

Central banks in the US, UK, Japan and China will provide an update on monetary policy. Australia: It’s pretty light on the economic docket out of Australia this week. Key data comes in the form of monetary policy minutes on Tuesday and the unemployment rate and RBA bulletin on Thursday; US: The Fed Reserve are set to cut rates this week on Wednesday. Other notable publications include industrial production, existing home sales, building permits and housing starts, Philly Fed Manufacturing Index and the New York Empire State Manufacturing Index; Eurozone: flash consumer confidence, construction output and current account along with Germany investor morale and producer prices; Rest of the World: The Bank of Japan holds its monetary policy meeting on Thursday and New Zealand‘s Q2 GDP growth and current account will be keenly watched.

AUD

The Aussie dollar was holding firm against the US dollar and the Euro as Markets opened on Monday. AUD/USD remains at six-week highs as markets prepares for the Fed Reserve to cut interest rates this Thursday by 25 basis points. The market has already priced in an 87% chance of this happening and a cut greater than this could see the Aussie dollar push higher. It’s light in terms of data out of Australia this week with investors keeping a keen eye on the RBA minutes due on Tuesday.

USD

Geopolitical uncertainty has increased due to the attack on a Saudi oil facility over the weekend. As a result, gold, the Japanese Yen and Swiss Franc have all strengthened off the back of safe-haven demand. Data last week form the US showed a stronger-than-expected US retail sales report alleviating fears of recession and Secretary Mnuchin reminded the markets that President Trump is prepared to keep tariffs in place and raise them if necessary. This gave the dollar some support against the commodity currencies like the Aussie dollar. The dollar also appreciated against the Euro due to additional easing from the ECB which President Trump seemed to be unhappy about stating that depreciating the euro against the dollar was hurting US exports.” Trade talks are still in focus with it being reported that the US could offer China an interim trade deal. Last week saw planned tariffs on Chinese items postponed for a two week period as a good will gesture. The market’s focus this week is the Fed Reserve interest rate meeting on Wednesday.

GBP

The British Pound appreciated over 4% against the US dollar last week and the chances of the UK leaving Europe without a deal reduced. The High Court will decide this week if it was lawful for the government to prorogue parliament. On Thursday this week the Bank of England (BOE) will release its Monetary Policy Summary along with their Official Bank Rate Vote. The next BOE rate move will greatly depend on how Brexit progresses, which is still uncertain. Other key data this week includes the release of UK inflation and retail sales, but Brexit developments will still dictate the Pound’s movement for weeks to come.

EUR

The Aussie dollar is back to levels previously seen before the ECB cut rates and started a fresh round of money printing. Shortly after the ECB announced a host of changes to their monetary policy, AUD weakened and flirted with retracing below 0.62. With the intention of stimulating the eurozone economy, the ECB cut the deposit facility interest rate by 0.1% to -0.5% and restarted the quantitative easing engine to ensure that 20 billion Euros per month will be injected into the system from November 1st this year. The central bank further introduced an interest rate tiering system so that banks are not penalised as much by negative interest rates and changed their forward guidance saying that their policies would continue “as long as necessary”.

Rest of the World

It’s a big day on Thursday as several central banks take the stage to set their interest rates. The Bank of England, Swiss National Bank and the Bank of Japan are all expected to hold rates while Norges Bank will likely hike rates by 25 basis points. The People’s Bank of China will also provide an update on its new loan prime rate (LPR) which was previously set at 4.25%. The new LPR replaces the bank’s old benchmark lending rate and has been designed to support the economy during trade tensions with the US.

Event Wrap

Monday

JPY – Bank Holiday

CNY – Fixed Asset Investment

CNY – Industrial Production

CNY – Retail Sales

CNY – Unemployment Rate

USD – Empire State Manufacturing

Tuesday

NZD – Westpac Consumer Sentiment

AUD – Monetary Policy Minutes

AUD – HPI (Quarterly)

USD – Industrial Production

EUR – German ZEW Economic Sentiment

CAD – Manufacturing Sales

Wednesday

NZD – GDT Price Index

NZD – Current Account

JPY – Trade Balance

AUD – MI Leading Index

AUD – CB Lending Index

GBP – Core CPI

GBP – PPI Input

EUR – Final Core CPI

CAD – CPI

USD – Building Permits

USD – Housing Starts

Thursday

NZD – GDP

AUD – Employment Change

AUD – Unemployment Rate

AUD – RBA Bulletin

USD – FOMC Economic Projections

USD – FOMC Statement

USD – Federal Fund Rate

USD – FOMC Press Conference

USD – Crude Oil Inventories

USD – Philly Fed Manufacturing Index

USD – Current Account

USD – Unemployment Claims

JPY – Monetary Policy Statement

JPY – BOJ Policy Rate

JPY – BOJ Press Conference

EUR – Current Account

GBP – MPC Official Bank Rate Vote

GBP – Monetary Policy Summary

GBP- Official Bank Rate

Friday

NZD – Credit Card Spending

EUR – German PPI

GBP – BOE Quarterly Bulletin

CAD – Core Retail Sales

 

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