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May 2016

RBA lowers inflation forecast

Published: Friday 06 May 2016

  • RBA lowers inflation forecast but increases rate cut speculation
  • US employment data should strengthen USD
  • Canadian employment data likely to disappoint
     
Yesterday's UK elections seem to have brought out the usual claims of magnificent victories and the inevitable sight of humbling defeats being spun as positive steps where 'lessons need to be learned'. That latter statement has to be delivered with the right level of solemnity obviously. We are still awaiting the London Mayoral result in the post-Boris era. Whether you like or loathe Mr Johnson, we are definitely going to miss his flamboyant style although maybe we'll see that in Number 10 someday. Who knows.
 
Yesterday's market was quiet across the board with only the US weekly jobless claims data holding the fort. That is definitely overshadowed by today's monthly data.
 
In a report published overnight, the Reserve Bank of Australia lowered their inflation forecast and heavily hinted that Tuesday's interest rate cut may not be the last we see. The Australian Dollar weakened on the news and appears tantalisingly close to allowing the Pound to push it up to A$2.0 per £1.  If Sterling had a little more support, that would definitely happen but the Brexit debate is leeching strength from the Pound and that is unlikely to change until 23rd June at the earliest.
 
US ISM survey offers a positive view on US service sector. The 55.7 index reading was well above market expectations and adds evidence in favour of the expected 0.25% US interest rate hike in June. One Fed Chairman suggested 32 or 3 rate hikes were likely this year and that helped strengthen the USD. If today's US employment report is as positive as many predict it will be, then the first of those rate hikes becomes an almost dead cert. The US Dollar is strengthening as I write and is likely to continue to do so into the weekend if more than 200,000 jobs are created and the unemployment rate falls to 4.9% as many have predicted.
 
This afternoon also brings the Canadian employment data but that is expected to be less rosy than the US numbers. There are many who feel the unemployment rate will rise to 7.2% and that there will be little change in the numbers out of work. The Canadian Dollar is already weakened by the news of the dreadful fires around Fort McMurray in Alberta; an area dominated by sand oil production. It is likely to fall further on this data.
 
And then the weekend arrives and, oh my word, we are expecting SCORCHIO weather in the UK; well certainly in the South East. I hope you get to see some sun and to burn stuff on the barbeque and get vey red because you forgot to put any sun oil on because, well 'it just didn't feel that hot because of the breeze'. Enjoy.
 
 
Catching a game
 
A couple are visiting USA when he asks her if she would like to go to see an American Football game. She tells him she knows nothing about the game but will go because he wants to.
 
They get good seats near the side of the field and they are so close they can hear the comments and conversations being had amongst the team right in front of them. She takes her seat, orders food and drinks and sits watching intently and he is so engrossed that he is standing and sitting and moving around so much trying to follow the action that they barely speak for the whole game.
 
After the final whistle, he apologises for not checking that she was enjoying herself. "No it is fine," she says. "Some of those players were very cute and the action was very exciting at some stages but it does seem an awful lot of kerfuffle for the sake of 25 cents."
 
"Erm, what do you mean by that?" says the frowning boyfriend.
 
"Well all I heard for most of the match was the coach bloke shouting, 'get the quarter back, get the quarter back.'"
 
Daily Currency Insight by David Johnson

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