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Rekindling trade talks boosts Australian Dollar

Published: Thursday 13 September 2018

  • More good news for Aussie Dollar
  • Central banks in the spotlight
​​​​By Killian Greenwood

The US and China are going to re-start trade talks before the next round of tariffs take effect. The news was further confirmed by the White House economic advisor Larry Kudlow. The Australian Dollar surged sharply on the news and was given another lift by solid job data this morning. The US Dollar, on the other hand, weakened, together with the Japanese Yen on easing trade threats.

The White House's top economic advisor, Larry Kudlow, said yesterday that communications with Beijing had “picked up a notch”. He also confirmed that US Treasury Secretary, Steven Mnuchin had sent an invitation letter to senior Chinese officials to restart trade talks. Also, “there’s some discussions and information that we’ve received that the top of the Chinese government wishes to pursue talks.”

More good news for Aussie Dollar

The Australian job market grew 44k in August, well above expectations of 18.4k. Full time employment grew strongly by 33.7k. Overall, the data affirmed the Reserve Bank of Australia’s (RBA) view that spare capacity is gradually being taken out, which is a prelude to meaningful wage growth. However, wages would actually need to show the increase before the RBA is convinced that eventually there is enough upward pressure on inflation to accommodate a rate hike.

Central banks in the spotlight

The European Central Bank (ECB) and the Bank of England (BoE) rate decisions are the main focuses today, but both are likely to be non-events. The ECB is widely expected to keep interest rates at 0.00%. The central bank will also reiterate the plan to halve their monthly asset purchase size to EUR 15B in October and then stop it after December.

The BoE is also widely expected to keep monetary policies unchanged today giving the economy time to digest the increase in rates in August. The August Inflation Report was a rather dovish one indicating that BoE may only have one rate hike in 2019, depending on incoming data and Brexit outcome.

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With a cow-culator.

What did the first plate say to the second plate?
Dinner's on me.

Why can't you trust the king of the jungle?
Because he's always lion.

Today's Major Economic Releases

Market BST Data/Event Previous Forecast
GBP 12:00 Bank of England Official Bank Rate 0.75% 0.75%
GBP 12:00 Bank of England Official Bank Rate Vote 9-0-0 0-0-9
GBP 12:00 Bank of England Monetary Policy Summary    
GBP 12:00 Bank of England Asset Purchase Facility 435b 435b
GBP 12:00 Bank of England Asset Purchase Facility Votes 0-0-9 0-0-9
EUR 12:45 European Central Bank Main Refinancing Rate 0.00% 0.00%
EUR 13:30 European Central Bank Press Conference    
CAD 13:30 Canada: National Housing Price Index 0.1% 0.1%
USD 13:30 US: Consumer Price Index 0.2% 0.3%
USD 13:30 US: Core Consumer Price Index 0.2% 0.2%
USD 13:30 US: Unemployment Claims 203k 210k

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