It was a busy 1st half of the week for the markets. Trade and economic data were in focus.
The U.S and China finally signed phase 1 of the trade agreement on Wednesday.
While the event was U.S market positive, a number of issues will not only test risk appetite bit also China’s willingness to stick to the script.
We’ve seen China renege on such agreements before. Continued pressure on the Chinese economy could see the agreement collapse and remove any chance of a full-blown agreement.
It has been a relatively busy first half, with the stats skewed to the negative relative to forecasts.
Much of the negativity stemmed from economic data out of the UK that raised a number of red flags for the BoE to consider.
The BoE had forecast a pickup in economic activity at the turn of the year. The latest figures suggest that the BoE may not be able to hold out any longer.
This view was reinforced by the increase in the number of dovish members delivering policy outlooks in recent days.
December retail sales figures could be the straw that broke the camel’s back…
ECB President Lagarde is due to speak late on Thursday after the ECB monetary policy meeting minutes are released.
– We don’t expect any talk of further monetary policy support following January’s prelim private sector PMI numbers.
– There may be some chatter on the review of the ECB policy framework.
– We could also hear some negative chatter on Brexit and a call for member state governments to crank up fiscal support.
What figures can we expect out of Australia? Can we expect any movement from the Aussie?
There were no major stats out of Australia through the 1st half of the week.
The bushfires, however, are expected to weigh on consumer spending and confidence. As a result, we have seen the probability of a rate cut rise to above 50% at the next meeting.
That makes the Aussie all the more sensitive to next week’s consumer confidence and employment numbers. The figures will give some indication of what lies ahead on the spending front.
The upside in the Aussie Dollar should, therefore, be limited, though we could see a brief pickup if GDP numbers out of China impress on Friday…
With over 28 years of experience in the financial industry, Bob has worked with various global rating agencies and multinational banks. Currently he is covering currencies, commodities, alternative asset classes and global equities, focusing mostly on European and Asian markets.