The RBA Cut Rates ahead of a Busy Day on the Economic Calendar

Earlier in the Day:

It was another particularly busy day on the economic calendar through the Asian session this morning.

New Zealand business confidence numbers, Australia manufacturing index and Japan’s Tankan survey numbers provided direction early on.

Later in the session, building approval figures out of Australia and the RBA interest rate decision also influenced.

Geopolitical risk took a back seat early on, with the news wires on the quieter side through the early hours.

For the Kiwi Dollar

The NZIER Quarterly Survey of Business Survey (QSBO) showed that a net 35% of businesses expect a deterioration in general economic conditions in the coming months. The increase in pessimism from 34% to 35% left business confidence at its lowest level since March 2009. According to the survey,

• The manufacturing sector remained the most pessimistic, while there were also signs of construction demand slowing.
• Retailers were also more downbeat as a result of weaker demand, with profitability in the sector at its weakest since Sep-09.
• Increased cost pressures and weak pricing power reportedly continued to weigh on profitability across most sectors.
• As a result of weakening profitability, a net 10% of firms cut staff numbers, which reflected the weakest level in hiring since Sep-12.
• Investment intentions were also negative, with investment intentions for buildings and plant & machinery both falling to their lowest levels since Sep-09.

The Kiwi Dollar moved from $0.62628 to $0.62578 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.26% to $0.6247.

For the Japanese Yen

The Tankan surveys delivered mixed results for the quarter.

The All Big Industry CAPEX Index rose by 6.6% in the 3^rd quarter, falling short of a forecasted 7.0%. CAPEX had risen by 7.4% in the 2^nd quarter.

The Tankan Big Manufacturing Outlook Index slipped from 7 to 2 in the 3^rd quarter, which was better than a forecasted fall to 1.

For the manufacturing sector, the Tankan Large Manufacturers Index fell from 7 to 5 in the quarter, which better than a forecasted 2.

For the non-manufacturing sector, the Tankan Large Non-Manufacturers Index declined from 23 to 21 in the quarter. Forecasts were for a fall to 20.

The Japanese Yen moved from ¥108.065 to ¥108.061 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.17% to ¥108.26 against the U.S Dollar.

For the Aussie Dollar

The AIG Manufacturing Index rose from 53.1 to 54.7 in September. According to the latest survey,

• Employment and new orders picked up in September, supported by the F&B and Machinery and Equipment manufacturing sectors.
• The F&B sub-index rose by 0.2 points to 59.2, while the Machinery & Equipment index increased by 2.5 points to 56.7.
• By sector, metal products (41.3) and TCF, Paper & Printing (41.8) continued to contract.
• Looking at the sub-indexes, the new orders sub-index rose by 3.8 points to 57.1, with the employment sub-index rising by 6.2 points to 57.6.
• Exports were in decline, however, falling by 6.1 points to 49.6, with the production sub-index falling by 3.4 points to 49.8.
• Average wages continued to rise, with the sub-index up 3.5 points to 63.8.

The Aussie Dollar moved from $0.67502 to $0.67501 upon release of the figures that preceded the RBA interest rate decision and building approval figures.

Month-on-month, building approvals fell by 1.1% in August, following on from a 9.7% slide in July. Economists had forecast a 2.5% rise. According to the ABS,

• A 2.4% slide in the approval of private houses weighed in August.
• Approvals excluding houses rose by 3.1%

The Aussie Dollar moved from $0.67518 to $0.67519 upon release of the figures that preceded the RBA interest rate decision.

Later in the session, the RBA cut interest rates by 25 basis points to 0.75%, which was in line with market expectations, which left the Aussie Dollar in the hands of the RBA Rate Statement.

The rate statement reflected the RBA’s willingness to ease monetary policy, which weighed on the Aussie Dollar.

The Aussie Dollar moved from $0.67457 to $0.67357 upon release of the rate statement. At the time of writing, the Aussie Dollar was down by 0.21% to $0.6736.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. September manufacturing PMIs out of Spain and Italy and finalized manufacturing PMIs out of France, Germany and the Eurozone will influence early in the session.

Later in the session, prelim Eurozone inflation figures will also influence. Any upside would be limited for the EUR, however, with negative sentiment towards the Eurozone economy pinning back the EUR.

Outside of the numbers, expect Brexit chatter and impeachment talk from the U.S to also influence.

At the time of writing, the EUR was down 0.08% at $1.0891.

For the Pound

It’s also a relatively quiet day ahead on the data front. September’s manufacturing PMI is due out later this morning.

With the UK economy struggling, a more accelerated decline in manufacturing sector activity would weigh heavily on the Pound.

Outside of the numbers, expect chatter on Brexit and the UK Parliament to also provide direction through the day.

The Pound is going to need talk of a deal to prevent a move lower to $1.21 levels…

At the time of writing, the Pound was down by 0.01% to $1.2288.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. Key stats include the market’s preferred ISM Manufacturing PMI for September. We can expect the employment and new orders sub-index to have the greatest influence alongside the headline figure

The Markit survey’s finalized manufacturing PMI is also due out but will likely have a muted impact on the day.

On the political front, any impeachment talk and chatter on trade will need consideration.

The Dollar Spot Index was up by 0.10% to 99.479 at the time of writing.

For the Loonie

It’s a relatively quiet day on the economic calendar. July GDP numbers are due out of Canada later this afternoon.

With the markets expecting the BoC to hold steady on rates, softer numbers would weigh heavily on the Loonie. For now, the Loonie continues to find support from monetary policy divergence.

On Monday, the Liberal Party’s announcement of a ramp-up in government spending had offset the negative impact of crude oil prices on the day.

The Loonie was down by 0.04% at C$1.3246, against the U.S Dollar, at the time of writing.