- Australian data continues to pile pressure on RBA
- BOE – no change but could weaken Sterling (Carney alert)
- Fed watching US data closely
Pressure is mounting on the Reserve Bank of Australia to cut their base rate after another contraction in new home sales. That’s the eighth month of contraction in the last 12. Overnight tonight we will see the Aussie service sector index and that too is expected to be in negative territory. The RBA has been awaiting further data before acting and maybe the last straw is not far away. Weakness in the Australian Dollar is the inevitable result; great for those buying the AUD but a cause for concern and a signal to plan ahead for those moving funds from Oz.
BOE – no change expected – but watch for Governor
Many traders will be returning to their desks after the Labour Day break to find quite a shift in the value of the Pound. Sterling has done a fine job in regaining most of its recent losses in the last 48 hours. The Pound will buy USD 1.3050 and EUR 1.1650 in the interbank market at the start of Thursday but the Bank of England meeting looms. No one is expecting any kind of change of policy from the BOE but Mark Carney does get to make a statement and we are all aware now that of his Dementor capability where the Pound is concerned. He is able to weaken sterling with a single phrase and often does even though his forecasting abilities leave a lot to be desired. Beware and perhaps plan to trade before 1.30 BST if you are averse to risk and need to sell the Pound.
German manufacturing in spotlight
In spite of a slew of poor Eurozone data, the. Euro itself is holding up reasonably well; only slipping a little against the Pound and US Dollar. There is a smattering of EU data this morning, including German retail sales and a number of purchasing managers indices from Spain, Italy, Germany and France amongst others. The main event is the economic forecasts report but, such is the importance of Germany to the Eurozone economy that the German manufacturing PMI could hold sway as far as the Euro is concerned. There will also be a couple of speeches from members of the Bundesbank and the ECB later.
Fed watching slowing US data
Us data is plentiful but the main items to watch are the weekly fresh jobless benefit claimant count, factory orders, productivity stats and unit labour costs (wage inflation guidance). All are watched by the Federal Reserve very closely and the Fed is under pressure from the President mostly, but also from the flat US data, to cut their base rate and/or add monetary stimulus to the economy. Poor data will add to the clamour and the USD should weaken. Also, oil prices are on the rise and that tends to weaken the USD.
Climate change cure found
Oh, and without wishing to get your hopes up too much, the key to climate change has been found! Yay! According to ‘The Week’, Oxford Professor, Dr Young-hae Chi has identified the cure. Invisible insect-like aliens are living and moving among us, breeding with humans to produce a super-species capable of solving the plant’s climate change problems. Woooo! Sadly they are invisible, so we can’t see them. He teaches Korean at Oxford’s Oriental institute, so it is hard to see where his research comes from but, if you are taking his course, I would worry what he has been teaching you and telling you it is Korean. You don’t want to arrive in Seoul or – worse still – Pyongyang demanding that your host’s grandmother should cook you marshmallow waffles with engine oil and a hamster liver when you thought you were asking for a glass of water.