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September 2016

Australian GDP published in line with expectations

Published: Wednesday 07 September 2016

  • Australian GDP published in line with expectations
  • German Industrial Production data released this morning showing a significant drop
  • Sterling at risk ahead of Mark Carney’s testimony this morning
Overnight Australia GDP published in line with expectations at 3.3% Y/Y and 0.5% Q/Q supporting the RBA’s decision to hold their interest rate a day earlier. In New Zealand manufacturing activity also rose 2.2% in Q2. This morning German Industrial Production data released this morning showed a significant drop, whilst yesterday saw Euro-Zone GDP numbers in line with expectations at 1.6% Y/Y & 0.3% Q/Q ahead of this month’s ECB meeting and press conference tomorrow.

The US Dollar softened overnight in response to much weaker than expected ISM non-manufacturing composite.  US markets still suggest 18% chance of a September rate hike but a string of weaker than expected data should have put it off the table. Meanwhile, futures are still pricing in 52.4% chance of a December rise. San Francisco Fed President John Williams said that the US economy was in "good shape". He's also optimistic and expects unemployment rate to fall to 4.5% in the coming year and inflation to climb back to 2% target in a year or two. Meanwhile, he emphasized that it "makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later."
The Pound has continued to perform well recently with the Manufacturing PMI last week and Services PMI on Monday both posting strong expansionary readings far exceeding the expected numbers and providing positive indications for the health of the UK Economy post-Brexit vote.

However this morning UK Industrial & Manufacturing Production data just released at 9.30GMT were mixed with Industrial numbers slightly better and Manufacturing slightly worse. 

This morning Mark Carney will discuss last month's Quarterly Inflation Report in front of the Treasury Select Committee which should provide key insight into the country’s economic sentiment. Recent data has been fairly robust however growth in Q3 is still likely to be anaemic at best. If policy makers emphasise the risks to the economy during the hearing; Sterling will struggle to hold on to its recent gains.
The well regarded National Institute for Economic and Social Research (NIESR) will release their UK GDP estimate at 15:00GMT. 

We then look across the Atlantic to Canada for the Bank of Canada’s interest rate decision and Ivey PMI.  Later the US Fed’s Beige Book economic report is due for release this evening.  Chinese & Australian trade data are scheduled for release in the early hours of Thursday.

With all the numbers under consideration today it’s perhaps worth considering the words of one of history’s most numerate individuals Sir Issac Newton:

“What we know is a drop, what we don’t know is an ocean.” 


A bank robber pulls out gun points it at the teller, and says, "Give me all the money or you're geography!"

The puzzled teller replies, "Did you mean to say 'or you're history?'"

The robber says, "Don't change the subject!" 


Today's Major Economic Releases 

Market BST Data/Event Previous Expected
GBP 09:30 UK: Manufacturing production m/m -0.3% -0.4%
GBP 09:30 UK: Industrial production m/m 0.1% -0.3%
GBP 14:15 UK: Inflation report hearings    
CAD 15:00 Canada: BoC rate statement    
CAD 15:00 Canada: Overnight rate 0.50% 0.50%
CAD 15:00 Canada: Ivery PMI 57.0 55.5
USD 15:00 US: JOLTS job openings 5.62m 5.58m
USD 19:00 US: Beige book    

FX Research and Daily Currency Analysis by Chris Verdet

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