A Testy Day Ahead for the Majors as the Threat of U.S Military Action LingersUncertainty over how the U.S will respond to the attacks on Saudi oil feeds could leave the markets tentative ahead of tomorrow’s FOMC decision.
Earlier in the Day:
The economic calendar was on the heavier side through the Asian session this morning.
Economic data included 3rd quarter consumer sentiment figures out of New Zealand and 2nd quarter house price figures out of Australia.
On the monetary policy front, the RBA also released its minutes from the 3rd September policy meeting.
Outside of the stats, geopolitical risk continued to influence ahead of tomorrow’s FOMC decision. For the global financial markets, the risk of U.S retaliation to Iran’s alleged involvement in the Saudi strikes will continue to test risk appetite.
For the Kiwi Dollar
The Westpac McDermott Miller Consumer Confidence Index fell from 103.5 to 103.1 in the 3rd quarter. According to the 3rd quarter survey,
- The Present conditions Index slipped by 106.6 to 106.4, with the Expected Conditions Index falling from 101.4 to 101.0.
- For households, the current financial situation sub-index rose from -4.7 to -2.4. Also positive was a rise in the expected financial situation sub-index, from -3.2 to 13.2.
- On the negative, however, was sentiment towards the economic outlook. The 1-year economic outlook index fell from -4.6 to -9.2, with the 5-year sub-index falling from 11.9 to -1.1.
- In spite of the RBNZ rate cut, household concerns over the economy weighed on spending intentions.
- The number of households who said they would spend slumped to its lowest level in 20-years.
- By contrast, the number of households who said they would repay debt surged to levels last seen in 2009.
The Kiwi Dollar moved from $0.63435 to $0.63411 upon release of the figures. At the time of writing, the Kiwi Dollar down by 0.08% to $0.6339.
For the Aussie Dollar
Quarter-on-quarter, house prices fell by 0.7% in the 2nd quarter, following on from a 3% fall in the 1st quarter. Economists had forecast a fall of 1%.
According to the ABS,
- Year-on-year, residential property prices fell by 7.4%
The RBA Meeting Minutes delivered few surprises. Salient points from the minutes included:
- News on the international economy had confirmed that risks to the global growth outlook were to the downside.
- Trade disputes between the U.S and China had escalated and China’s economy had continued to slow.
- Domestically, employment had continued to grow strongly, with the participation rate at a record high.
- However, the unemployment rate had remained steady at 5.2%, with wage growth remaining low.
- Spare capacity remained in the labor market, with the economy able to sustain lower rates of unemployment and underemployment.
- While housing turnover remained low, there had been further signs of improvement in the housing markets.
- GDP growth in the 2nd quarter was expected to have been around 0.5%. Private final demand was expected to have been weak.
- The outlook for output growth was being supported by low-interest rates, recent tax cuts and stabilization in the housing markets and a brighter outlook for the resources sector.
- Uncertainty over the outlook for consumption growth remained, however.
- Inflationary pressures remained subdued but were expected to increase gradually to just over 2% over 2021.
On the policy front,
- Members would assess developments in both the international and domestic economies, including labor market conditions.
- Further monetary policy easing would be favored if needed to support sustainable growth in the economy and achieve the inflation target over time.
The Aussie Dollar moved from $0.68561 to $0.68533 upon release of the figures and minutes. At the time of writing, the Aussie Dollar was down by 0.20% to $0.6851.
The Japanese Yen was down by 0.08% to ¥108.21 against the U.S Dollar.
The Day Ahead:
For the EUR
It’s a busier day ahead on the economic calendar. Key stats include September ZEW economic sentiment figures for Germany and the Eurozone.
While Germany’s economic sentiment figure is the key driver, we can expect the Eurozone number to influence.
Outside of the numbers, updates from Brexit talks will also provide direction on the day.
At the time of writing, the EUR was up by 0.07% to $1.1009.
For the Pound
It’s a quiet day ahead on the data front. There are no material stats to provide the Pound with direction through the day.
Today’s Supreme Court ruling on the lawfulness of suspending Parliament will impact later in the day. Any updates from Johnson’s meetings in Europe and political chatter will also influence.
At the time of writing, the Pound was down by 0.10% to $1.2418.
Across the Pond
It’s a relatively quiet day ahead on the economic calendar. August industrial production figures are due out this afternoon.
The markets will be looking for an uptick in production to further ease any near-term concerns over the U.S economy.
Outside of the stats, chatter from the Oval Office will need monitoring throughout the day
The Dollar Spot Index was up by 0.03% to 98.643 at the time of writing.
For the Loonie
It’s also a relatively quiet day on the economic calendar. July manufacturing sales figures are due out later today.
The stats are unlikely to have a material influence on the Loonie.
The Loonie was down by 0.07% at C$1.3249, against the U.S Dollar, at the time of writing. A pullback in crude oil prices weighed early on in the day.