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September 2017

Canadian interest rates – no change expected

Published: Wednesday 06 September 2017

  • Sterling recovers… a little
  • Australian growth headline figure hides private sector slowdown
  • Canadian interest rates – no change expected
  • US Dollar weaker as storm costs start to be counted
By David Johnson
 
 
Sterling had a much better day yesterday after the service sector was down a tad, but still well into growth territory. That calmed nerves a little and traders took this data plus last week’s strong manufacturing news as signs to undo some of their short sterling positions. There is a definite lack of UK data today, so the Pound is likely to take its cues from events outside Britain’s borders.
 
Australian economic growth was confirmed as rising by 0.8% in the second quarter of the year. That was substantially higher than in Q1 (0.3%) and is a good news story for Australia. However (you knew there would be a ‘however’, didn’t you?) this figure was distorted by a surge in public sector spending and that hid a slowdown in private sector activity. Many analysts are concerned that we will see a swing in the other direction in the Q3 figures, so the Australian Dollar didn’t strengthen as it might have and is, in fact, a little weaker this morning.
 
The Euro is treading water as we await tomorrow’s European Central Bank (ECB) interest rate announcement. German factory orders dropped 0.7% in the month to July as tensions between North Korea and America appear to have discouraged overseas buyers.
 
The US Dollar has weakened over the last 24 hours. A number of factors are at play here. The tensions with North Korea are causing nervousness, but more immediate is the growing cost of the storms hitting the US mainland. Residents of Florida and the Caribbean islands are awaiting the second massive storm to hit the US in a matter of weeks; Irma being the most ferocious storm ever recorded off America’s Atlantic Coast. In the midst of that, we will see the US Trade Balance and the Institute for Supply Management’s (ISM) Service Sector Index today. The ‘non-manufacturing’ survey, as they put it, is the one to watch. It is expected to be a little stronger than last month, but we have had a lot of curious data results this week, so bank on nothing. This evening sees the publication of the Federal Reserve Beige Book. This is a regional view of the US economy and it forms part of the agenda for the next Federal Reserve meeting, so it is significant.
 
This afternoon will also bring the Bank of Canada’s interest rate decision. No change is expected in the 0.75% base rate, but volatility around that announcement at 14:00 GMT is inevitable.
 
Stay safe everyone in the path of Irma. It looks terrifying.
Quick Jokes
  • I’ll tell you what’s making headlines everywhere…Corduroy pillows.
  • Why do you like Switzerland so much? Well the flag is a big plus.
  • I started a band called 999 Megabytes — no gigs as yet.
  • Is there a difference between ignorance and apathy? I don’t know and I don’t care.
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