Overview:

• USD steadies after the July US Non-farm payrolls report comes with a stronger than expected rise in headline payrolls and a somewhat higher than expected annual rise in annual average hourly earnings at 2.5%.
• Also at the end of last week, White House Economic chief economic policy adviser Gary Cohn was talking up the timetable of tax reform including making clear that incentives for US firms to repatriate profits held overseas was an integral part of the administration tax plans.  Both factors offered some support to the USD.
• Geopolitics remains an active space, the UN Security Council on Saturday imposing new sanctions on North Korea ostensibly banning exports of coal, iron, lead and seafood in response to Pyongyang’s testing of two more ICBMs that could target the U.S.  We note that restrictions imposed by China’s imports of North Korean coal at the start of this year have already been of some support for coal prices.
• This week we take a closer look at retail, macro forces still suggesting that household income growth remains anaemic, that with low levels of housing affordability and with hikes in power prices now impacting, retail sales conditions are likely to remain challenging.  And that’s all with Amazon and other potential notable new international entrants entering the local market.
• Even so, after what’s been a challenging episode for retailers, shoppers still expecting and getting discounts and deals, sales and business conditions have finished the financial year in a somewhat more encouraging state.
• This Week: Two local themes stand out.  First is the focus on the business-consumer divergence, exposed further this week with tomorrow’s NAB Business Survey (it’s been above average), then Wednesday’s WMI Consumer Sentiment out Wednesday.  Sentiment has been below average, though the weekly measure ticked higher in the second half of July.  The second focus is RBA Governor Lowe’s testimony on Friday, when MPs get the chance to explore his views on the economy, monetary policy and anxiety over the AUD hover close to US0.80c.  It was US0.769 when he last testified in February, having been lower since.
• Offshore, the RBNZ is likely to remain firmly on hold (Thursday), there’ll be interest in whether tomorrow’s China trade data points to any change in momentum of the Chinese economy, and there’s several Fed speeches on offer.  US CPI for July on Friday will reveal whether US inflation remains subdued, as the market expects.

For full analysis, download the report

• Australian Markets Weekly: 7 August 2107 (PDF, 220kb)

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