Bell FX Currency Outlook: The AUD has opened unchanged following a quiet night in currency markets with the US closed for Labor Day celebrations.
Australia: There were no major surprises in the European time zone. Some Euro-Zone PMI's were released and ECB President Draghi commented purchases of sovereign debt with maturities of three years or less would not be considered 'state financing' (read "aid").
Dollar notes are seen in this picture illustration
The PMIs pointed towards further contraction in industrial production but importantly have not worsened in recent months. German Finance Minister Schaeuble had previously commented Germany would not accept ECB financing of state budgets.
Staying with Europe for just a moment, equities rose on expectations of further monetary policy stimulus ahead of the Bank of England and the European Central Bank meetings later this week.
Australian retail sales fell 0.8% in July. ANZ job ads fell 2.3% in August. The RBA Board meets today and is expected to leave the cash rate unchanged at 3.50%. It is felt the RBA is likely to wait and assess the impact on the economy of earlier policy easing which have seen lending rates fall ~ 1%.
The Board is likely to discuss the effect of recent sharp falls in bulk commodity prices on the Australian economy, including the investment outlook, and of course the high AUD.
We expect the RBA to maintain an easing bias and cut rates this and next year. Australia's Q2 balance of payments data will also be released and the terms of trade is expected to have fallen modestly (note however it has fallen sharply in Q3 to date).
With the macroeconomic data continuing to show weakness in Asian economic activity and commodity prices remaining sluggish, we expect to see the AUD moderate over the next few weeks which can't come soon enough for many parts of the Australian economy.
Majors: All financial markets in the US were closed. Oil prices were stronger in light overnight trade despite weak Chinese data showing a sharper economic slowdown. Markets are positioning for more stimulus from China after weak Chinese manufacturing PMI.
In China, the Chinese PMI fell in August and GDP has been downgraded to 7.8% from 8.2% with further downside risks. It had been expected that with a weak external environment that domestic demand would be the main driver of growth but the implementation of fiscal and monetary policy has been slower than expected.
In Spain, Andalusia became the latest Spanish region to request emergency funding, seeking a €1bn advance from the central
government. Tonight the US ISM manufacturing index for August is the main release.
04 SEPT AU Current Account Balance
AU Cash Rate Target
EU Euro-zone PMI
US ISM Manufacturing
For the latest dealing prices and rates visit www.bellpotter.com.au
To contact the editor, e-mail:
Most Popular Slideshows
- Australia Bids Adieu to Adam Spencer's Mornings on ABC's "702 Breakfast" Show [PHOTOS]
- Top 10 Hottest Celebrities with Shocking Weight Loss (And Find Out Their Secrets!) [PHOTOS]
- Mars Curiosity Rover Photos: UFO Hunter Spots Strange 'Ruins,' 'Missile' [PHOTOS, VIDEO]
- Miranda Kerr Exposes Breasts to Crew, Wardrobe Malfunction 'Deliberate Accident?' [PHOTOS]