Australian Markets Weekly: 29 February 2016

Huge week with ISMs and payrolls the key. RBA to remain on hold. NAB sees $A stronger for longer.

• It’s hard to remember such a packed week with a confluence of major Australian and global data along with the RBA’s March Board meeting and the Super Tuesday of US presidential candidate primaries/caucuses.

• US data likely hold the short-term key to markets, particularly if the non-manufacturing ISM can hold up despite weakness in the manufacturing ISM and if payrolls growth can continue to lower the US unemployment rate. This may pressure the markets’ assumptions of the Fed being on hold in 2016, with the economic data tending to have been over-ridden by negative interest concerns in recent times.

• Domestically, in the early part of the week we have the remaining inputs in the lead up to Wednesday’s Q4 GDP, which NAB expects at +0.6% q/q (market +0.5% q/q) along with the regular run of monthly data (building approvals Tuesday; Retail Sales Friday).

• More interest will be on the RBA’s March Board meeting on Tuesday. The Bank has outlined that scope to ease policy further exists, but to use that scope will require either Australia’s labour market data to soften or current volatility in financial markets to dim the global and Australian demand outlook. For now, these global concerns look overdone, while Australian labour market data continue to broadly hold up, meaning the Bank is unlikely to make much of a change to its outlook at tomorrow’s Board meeting.

• Ray Attrill, NAB’s Global Co-Head of FX Strategy writes this week on the outlook for the Australian dollar. We have delayed our forecast of new cycle lows until H2 2016.

For further information please refer to the attached report:

• Australian Markets Weekly: 29 February 2016(PDF, 775kb)