- Aussie base rate on hold
- Strong UK manufacturing data fails to lift Pound
- UK Service Sector Purchasing Managers’ Index awaited
By David Johnson
The battle of words between the US and North Korea has China in the referee role and South Korea criticising its aggressive northern neighbour. The markets are surprisingly sanguine considering all sides appear to have planet-deforming weapons at their disposal, but perhaps the markets don’t believe it’s in anyone’s interests to press any red buttons. Let’s hope that remains the case.
The Reserve Bank of Australia (RBA) left the Aussie base rate on hold when they met overnight. At 1.5%, it is still attractive to yield-hungry investors, so the Australian Dollar remains strong. That is not what Australian exports or the Aussie authorities want, but there isn’t a lot they can do about that without stifling the domestic economy. The statement from the RBA was short and sweet, with little news. We will get Australian retail sales data on Thursday, so that will give a local perspective on the economy.
Overnight news also included a very positive report from the manufacturing trade association, EEF. They reported strong growth and confidence, resulting in a positive balance of companies planning extra investment. This chimes with the CBI report, which provided a similarly positive result. Sterling was largely unmoved, maybe because manufacturing still only accounts for 10% of UK Gross Domestic Product (GDP). Today’s Service Sector Purchasing Managers’ Index showed a small decrease in activity from 53.8 in July to 53.2 in August. This sector accounts for more than 70% of UK GDP, so clearly, this has the potential to move Sterling on that data, but the Pound seems to be holding steady – for now…
This afternoon brings US factory orders data alongside durable goods orders. Individually, these data releases are not generally market moving, but the forecasts for these numbers are quite negative, so USD weakness could ensue.
And Vnesheconombank in Russia has invested in a company developing a single seater quad-copter-drone-thing that could be the commuter vehicle of the future. Just Google Hover Surf and tell me you don’t want one. I certainly do.