- Sterling continues to recover from Bank of England shock
- Reserve Bank of Australia rates on hold
- Saudi concerns boost gold and weaken USD
By David Johnson
Australian policy remains the same
The Reserve Bank of Australia (RBA) left their base rate on hold overnight and really didn’t change the tone of their statement since their last meeting. They kept their 3.0% growth forecasts for the next few years and mentioned that they expect to see unemployment fall below 5.5% and then to decline over a period of time. This is all good news, but the Sterling – Australian Dollar rate rose in line with Sterling’s recovery across the board.
Sterling shows resilience
The Pound did take a hammering after the Bank of England’s forecast for two rate hikes in the next three years was first seen, but, as we suspected at the time, the UK’s economic resilience has allowed the Pound to recover slowly and softly. That, in spite of a poor retail sector report from the British Retail Consortium which was released overnight. The poor survey result reflected the worse decline in non-food sales since 2011. The lack of UK data for the rest of the day should leave the Pound to edge higher in line with its current path.
Crude oil cost climbs, gold strengthens
The price of crude oil surged to a two-and-a-half year high over the past few days, as tensions rise between Saudi Arabia and Iran and as politics within Saudi Arabia heighten tensions elsewhere. Higher energy prices tend to weaken the US Dollar and we have seen some of that. Those heightened tensions after corruption linked arrests amongst Saudi’s royal family have strengthened gold; the ultimate safe haven product. Saudi Arabia has also accused Lebanon of declaring war on them after attacks by Hezbollah.
Strong forecasts for Eurozone
From the Eurozone today comes retail sales data and the forecasts are very strong. Perhaps that will be the thing that stops the Euro’s decline. Or maybe not. The EU has a lot of problems to deal with and the Euro – USD rate below 1.16 is testament to traders’ thinking on the shared currency.
New Zealand interest rate decision eagerly awaited
And the rest of the day has less data than the VAT Lewis Hamilton paid on his Bombardier CL-600. So, traders will be awaiting tonight’s Reserve Bank of New Zealand (RBNZ) interest rate announcement with anticipation. No too much anticipation though, because, like the RBA, they are expected to leave everything on hold.
A busy day for markets tomorrow…
Tomorrow is a busier day, with the European Central Bank’s (ECB) economic bulletin and, from the UK, we will get manufacturing and construction data, plus the National Institute of Economic and Social Research (NIESR) estimate of Q3 Gross Domestic Product (GDP) growth. A livelier day should ensue.
I might have gotten away with it, if it wasn’t for you pesky kids!
And a woman from Virginia has been sacked from her job in marketing after an image of her riding alongside the US President’s motorcade went public. In the image, she is seen raising her middle finger to the President and she might have got away with it if she hadn’t made the picture her Facebook profile picture. Is that the death knell for freedom of expression then?