For the full details, download the full report: Australian Markets Weekly 27 August 2018

• The market starts the week with a new Australian Prime Minister and a new Ministry. (You can find the link to the new ministry here.)
• In this Weekly, we note the Australian economy has performed well despite a number of years of intermittent political instability. Prime Minister Morrison’s initial appointments and policy signals suggest no dramatic policy shifts and a desire to heal internal party divisions. We cover eight key issues.
• The AUD opens the week back in the 73s, the USD on the back foot and investor sentiment offshore ending the week on a positive note.
• Setting the ball rolling Friday and pushing the USD lower was news that the People’s Bank of China would resume using the “counter-cyclical” factor when calculating the yuan’s daily reference rate, in essence restraining the influence of market forces that have been driving the Chinese currency lower. The PBoC news produced a nearly nine big figure (1.4%) drop (Chinese currency appreciation) in USD/CNH, sparking an across the board decline in the USD, the AUD back above 0.73 on Friday, aided also by a resolution of the leadership tussle with a new PM.
• Fed Chair Jay Powell added to the USD’s woes in his opening address to the Jackson Hole symposium cooling down any suggestions the Fed will be proceeding with anything other than a gradual path of raising rates by pointing to no risk of an overheating economy. “While inflation has recently moved up near 2 per cent, we have seen no clear sign of acceleration above 2 per cent, and there does not seem to be an elevated risk of overheating.”
• For this week, the key local number is likely to be Thursday’s Capital Expenditure for the June quarter. It comes after other Q2 partials – including last week’s Construction Work Done – that have been stronger than expected, suggesting upside risk to NAB’s 0.7% q/q model pick for GDP (out Wednesday week).
• It’s also worth noting that while there has been significant focus on the emerging recovery in Non-Mining Capex, recent announcements hold out the prospect of a pick-up in Mining Investment in coming years (though this is not likely to be revealed in this week’s data). Also out are Building Approvals and RBA Credit.
• Offshore, perhaps the two picks are the Chinese PMIs for August, out Friday, and the US PCE deflator out Thursday.

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