December 10, 2019
The Aussie dollar has been weaker at the start of this week due to the combination of bumper US job numbers last Friday and anticipation over the next phase of the US-China trade talks. Wall Street also closed lower on Monday, after three consecutive sessions of gains, as investors now await a Fed policy announcement this Wednesday.
Australia: NAB Business Confidence, RBA Gov Lowe Speaks, and RBA Assist Gov Bullock Speaks; US: Retail Sales, FOMC Statement, Fed Funds Rate, and FOMC Press Conference; Eurozone: German Final CPI, SNB Monetary Policy Assessment, SNB Press Conference, UK Parliamentary Elections, UK GDP, Industrial and Manufacturing Production, EU Monetary Policy Statement, and ECB Press Conference.
The Australian dollar was lower on Monday as markets took in the larger than expected US jobs numbers last Friday. 266k new jobs were created in the month of November with the unemployment rate falling from 3.6% to 3.5% which boosted the Greenback against the Aussie dollar. In European markets AUD has been relatively mixed with AUD/EUR nearing one-month highs. However, paired against the Swiss Franc AUD has fallen to three-week lows.
Today’s RBA speech from governor Lowe avoided monetary policy and focused the spotlight on payment policies. The direction of the Australian dollar over the next week now remains at the mercy of the US with inflation data Wednesday and the US Federal Reserve decision on Thursday.
NAB business confidence fell to zero in November from the October figure of 2. This was broadly in line with market expectations but is still not AUD positive. Confidence fell in all industries, except for retail and wholesale which rose slightly.
The US dollar gained on the back of extremely positive job numbers and a slight reduction in the unemployment rate to 3.5%. The printing of 266k new jobs was the best jobs report since February this year. An improvement in US consumer confidence has also helped the US dollar along with with the Dow Jones index pushing 1.2% higher.
The all-important jobs data from the US always considers a figure above 200k bullish and with the US labour market showing strength and average earnings increasing by 3.1% over the past year, this would now point to the Fed being reluctant to cutting interest rates anytime soon.
The Pound’s recent strength could be a thing of the past over the next few days if the Conservative Party fails to win a majority in the general election. Sterling has increased on speculation of a Tory majority, but for this reason, further upside potential may be limited from here on and the downside risk could increase. A Tory government would encourage sterling buyers initially, but the market would then turn to look at the UK leaving the EU on January 31st and also the prospects of a trade deal being agreed by the end of 2020.
Ultimately, it’s going to be up to the electorate as to whether the country continues three and a half years of indecision, and probably prevent Brexit by electing a coalition government, or actually leave the EU by electing a Tory majority government. The Pounds recent gains against the Aussie and US dollar could reverse on the prospect of a Corbyn-led administration before a potential rally on the prospects of another referendum later in 2019.
In Europe, the AUDEUR was stronger as the euro fell ahead of this week’s key meeting from the European Central Bank. The Euro’s performance is very much being determined by other currencies at the moment. This is despite German economic data showing the economy has slowed. Industrial production hit a 10-year low last Friday, as it dropped 1.7% in November. The ECB interest rate decision this Thursday is not expected to change and will probably remain the case until Christine Lagarde’s overview of the Eurozone has been completed.
Rest of the World
Chinese inflation grew to 4.5% in November 2019 from a previous figure of 3.8% in the previous month. This was above the market expectations of 4.2% and is the highest reading since January 2012.
JPY – Final GDP
EUR – German Trade Balance
AUD – NAB Business Confidence
AUD – RBA Gov Lowe Speaks
AUD – RBA Assist Gov Bullock Speaks
CNY – CPI
GBP – GDP
GBP – Manufacturing Production
GBP – Industrial Production
EUR – German ZEW Economic Sentiment
AUD – Westpac Consumer Sentiment
CNY – Foreign Direct Investment
CNY – New Loans
USD – CPI
USD – FOMC Statement
USD – Fed Funds Rate
USD – FOMC Press Conference
AUD – RBA Bulletin
EUR -German Final CPI
CHF – SNB Monetary Policy Assessment
CHF – SNB Press Conference
GBP – Parliamentary Elections
EUR – Monetary Policy Statement
EUR – ECB Press Conference
CAD – BOC Gov Poloz Speaks
AUD – Business NZ Manufacturing Index
USD – Retail Sales
USD – FOMC Member Williams Speaks
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