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September

Australian base rate on hold - less cautious Reserve Bank of Australia

Published: Tuesday 04 September 2018

  • Sterling slips as Chequers plan looks rocky
  • Manufacturing in focus for the US
​​By David Johnson

The Reserve Bank of Australia (RBA) kept its base rate at a record low for the 25th consecutive meeting when they met early this morning (UK time).  Their statement was a tad less negative than previously and the markets, keen to take some hint from the RBA, decided that was as good a reason as any to buy the Australian Dollar.
 
Stronger Sterling could be a long wait
 
Sterling is lower after further hoohah on whether the UK Prime Minister will get her Chequers Brexit plan anywhere near approval. No, seems to be the overriding feeling, so the markets decided to sell Sterling and sit on their hands until more clarity is available. Could be a long wait… The British Retail Consortium also announced a slowdown in sales overnight, but the number was still 0.2% growth and that has to be a small victory for the high street. However, the construction sector Purchasing Managers’ Index (PMI) was weaker than the previous month and well down on expectations. Sterling hasn’t collapsed, though. Perhaps traders are weary of selling the poor little Pound.
 
Italy situation spells trouble for EU
 
Italy’s mahoosive debt mountain has become a focus of attention as they battle with the EU over funding for migrants and the real risk of a localised recession in Italy. I am sure they are wondering ‘why them?’. They are seeking to break EU rules and expand their budget deficit when the EU is pressing them to tighten things up. Look out for headlines asking whether this is the beginning of the end for the EU.
 
Manufacturing dominates data in US
 
US traders return from a long weekend this afternoon with a strengthened US Dollar and just as many issues going on as there were on Friday.  Their day will be dominated by manufacturing sector data and the forecasts are slightly lower than the previous month. The US Dollar is more likely to be driven by presidential Tweets than anything like hard data, though.
 
The people’s lottery?
 
And I love the fact that the National Lottery organisers think ticket sales are falling because we all want a pension style jackpot stretching out over 25 years rather than the immediate big lump sum. I am guessing everyone except them knows that making the odds much longer and pushing the cost up is the key. The lure of a big pay out is perhaps the only thing keeping ticket sales ticking over. I also wonder if, keeping the bulk of the funds for payment to the winner over 25 years might be good for cash flow, but seeking a commercial gain for the lottery people is probably a judgemental thought I should erase.
The Note
 
A father passing by his 15 year old son's bedroom was astonished to see the bed was nicely made and the floor was clear; all his clothes and detritus having been neatly packed away. That was suspicious.  Then he saw a green envelope propped up prominently on the centre of the bed. It was addressed, "Dad".  With the worst premonition, he opened the envelope and read the letter with trembling hands:
 
“Dear Dad, It is with great regret and sorrow that I'm writing to you. I had to elope with my new girlfriend, because I wanted to avoid a scene with you and Mum.
 
I've been finding real passion with Chardonnay and she is so nice. I know her piercing, tattoos, and her motorcycle clothes don’t suggest that, but we are in love. She's pregnant and Chardonnay said that we will be very happy.
 
Even though you don't like her much, probably because she is so much older than me, she already owns a caravan on a park in Dartford where we can live and she is on enough benefits to keep us until I can get a job.  Chardonnay says I don’t need to finish school because there are so many jobs on the funfairs and fruit picking that don’t ask for GCSEs. She wants to have many more children with me and that's now one of my dreams too.
 
Chardonnay taught me that marijuana doesn't really hurt anyone and we'll be growing it for us and trading it with her friends for all the other chemicals we need to make pills etc.  Chardonnay has become a big user but she has it under control. In the meantime, we'll pray that science will find a cure for her condition so Chardonnay can get better; she deserves it.
 
Don't worry, Dad, I'm 15 years old now and I know how to take care of myself. Someday I'm sure we'll be back to visit so you can get to know your grandchildren.
 
Your son, Tom
 
PS: Dad, none of the above is true. I'm over at Mike’s house. We’re watching the game on Sky.  I just wanted to remind you that there are worse things in life than my report card that's in my desk centre drawer. I love you! Call when it is safe for me to come home.”

Today's Major Economic Releases

Market BST Data/Event Previous Forecast
GBP 09:30 UK: Construction Purchasing Managers' Index 55.8 54.9
EUR 10:00 EU: Producer Price Index 0.4% 0.3%
GBP 13:15 Bank of England Inflation Report Hearings    
CAD 13:30 Canada: Manufacturing Purchasing Managers' Index 56.9 56.9
USD 14:45 US: Final Manufacturing Purchasing Managers' Index 54.5 54.5
USD 15:00 US: Manufacturing Purchasing Managers' Index 58.1 57.6

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news