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Situation normal at Australian central bank

Published: Tuesday 06 November 2018

  • Euro awaits next Italy development
  • Escalating trade wars equal uncertainty
  • Sterling stronger on Brexit boost
  • Eyes on US Mid-terms
​​By Killian Greenwood

The Reserve Bank of Australia (RBA) meeting this month was effectively a non-event. As was widely anticipated, the members left the cash rate at 1.5%, for the 25th consecutive meeting. The members remained upbeat over the economic outlook, expecting the job market to strengthen further and wage growth to improve. The central bank left its assessment of the housing market unchanged, while acknowledging tighter credit conditions. The Australian Dollar is trading broadly higher on the news.

Euro awaits next Italy development

Eurozone finance ministers showed a united stance against Italy’s budget in the meeting in Brussels yesterday. In a statement, they said “we agree with the Commission’s assessment” on Italy’s draft budget plan. And, the group “look forward for Italy and the Commission to engage in an open and constructive dialogue and for Italy to cooperate closely with the Commission in the preparation of a revised budgetary plan which is in line with the Stability and Growth Pact.”

At the post meeting press conference, Commissioner for Economic Affairs, Pierre Moscovici, reiterated that a “new” or “revised” Draft Budget Plan was requested by 13th November, and “that is a necessity”. The Euro is steady this morning awaiting further impetus.

Escalating trade wars equal uncertainty

The US and China will hold a top-level security meeting on Friday in Washington. Secretary of State, Mike Pompeo, Defense Secretary, Jim Mattis, and a Chinese politburo member and Defence Minister will be involved in the meeting. It’s generally seen as preparation ahead of the meeting between Trump and Xi in the upcoming G20 summit later in the month. Chinese Vice President Wang said in Singapore today that “both China and the US would love to see greater trade and economic cooperation.” Wang added “The Chinese side is ready to have discussions with the US on issues of mutual concern and work for a solution on trade acceptable to both side.” An escalating trade war increases uncertainty and markets have already begun to sell stocks and reprice risk.

Sterling stronger on Brexit boost

Sterling has continued to rise on speculation that a Brexit deal may be close. Despite continued denials from policy makers the Pound has appreciated to a 2 week high. Prime Minister May will hold a cabinet meeting later today where the Irish border will be the focus of attention. Time is running out if there is to be a November summit to announce a deal with the EU and this week could be pivotal. Any news of a breakthrough will see the Pound soar to new highs.

Eyes on US Mid-terms

The focus later today will be in the US as we await results of the Mid-term elections. Normally these can pass us by without causing so much as a ripple however these will be seen as a referendum on the Trump Presidency. If the Democrats manage to take back the house, Mr. Trump may struggle to continue on the current legislative path. Stocks and the US Dollar have surged as Mr. Trump has aggressively cut taxes, any sign that this may not continue and the Dollar may lose some of its lustre.

What currency do they use in outer space?

I don’t advertise my lip reading business.
It’s all word of mouth.

Why is it unwise to share your secrets with a clock?
Time will tell.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
USD All Day US: Congressional Elections    
GBP 09:00 UK: Final Services Purchasing Managers' Index 53.3 53.3
EUR 10:00 EU: Producer Price Index 0.3% 0.4%
CAD 13:30 Canada: Building Permits 0.4% 0.3%
USD 15:00 US: JOLTS Job Openings 7.14m 7.14m
NZD 21:45 New Zealand: Employment Change 0.5% 0.5%
NZD 21:45 New Zealand: Unemployment Rate 4.5% 4.4%

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