Weekly Market Calendar
1/10 China Manufacturing/Non-Manufacturing/Composite PMI, Australia Manufacturing PMI, Tankan Report, NZ Dairy Auction, Japan Manufacturing PMI, UK/German/France/EU Manufacturing PMI, EU Employment, US Manufacturing PMI, ISM Manufacturing
2/10 Australia Manufacturing PMI, RBA Rate Decision, Japan Consumer Confidence, UK House Prices, Australia Commodity Prices, NZ House Prices, Australia Services PMI
3/10 NZ Commodity Prices, Japan Services/Composite PMI, Australia Building Approvals, UK/France/German/EU Services/Composite PMI, EU Retail Sales, US Weekly Mortgage Applications, US Services/Composite PMI, ADP Jobs Report
4/10 Australia Trade, Challenger Jobs Report, US Weekly Jobless Claims, US Factory Orders, US Durable Goods Orders
5/10 Australia Retail Sales, German Factory Orders, UK House Prices, US Trade, Non-Farm Payrolls, US Employment
Weekly Market Report
A week dominated by the UN, International Trade and interrupted by Central Bank action. The FOMC meeting confirmed yet another interest rate rise, while recognising the booming US economy and indicating a further rate rise for this year and another three for 2019. The Fed has confirmed a return to a normalised monetary policy as the US economy thrives. The rising rates are reflection of the strong domestic economy that dictates monetary action and ignores Trumps criticisms. This is in direct contrast to Central Banks outside of the USA. The ECB, Bank of Japan, RBA and RBNZ all maintain extremely accommodative monetary policy, with record low interest rates and QE instruments employed. The 'QE' is a continuation of policy post-GFC, corrupting markets and allowing mismanagement of debt accumulation. The EU, Japan, Australia are running massive deficits and accumulating debt that would be unsustainable without the distorted monetary conditions.
The political focus was around the UN where world leaders met. Trump took no prisoners, accusing the Chinese of interference in the US electoral process to influence trade negotiation. The Chinese have levied tariffs on targeted US States that support Trump (e.g. Farmers in Republican States). The Chinese denied this but the evidence is irrefutable. Trump is the only leader that will actually call the Chinese out, ignoring diplomatic convention. The US will prevail in their Trade negotiations, if for no other reason, than the extremely unbalanced trade situation. China and Canada look to be playing politics to take advantage of the mid-term elections in the USA, hoping the Democrat soft-touches regain control of the Congress, but Trump will prevail.
Commodity currencies showed some resilience, with strong economic data boosting the currencies, but have been overwhelmed by the global trade insecurity. Trade exposed nations, like NZ and Australia, are hostage to US/China Trade war, remaining extremely vulnerable. The Fed's bullish monetary policy, insuring Dollar strength and undermines the local currencies. The AUD tests 0.7200, on the downside, while the NZD is flailing around 0.6600. Trade will continue to dominate the local currencies.
Paul Bettany
Collinson & Co
Mobile 0406-744-923