Below trend growth to continue
The NZD at least has shown some movement and to some surprise, the Canadian dollar sits at the top of the G10 FX leader-board.
Mildly depressing to come in and find AUD/USD still within 10 points of 0.7250 in what has been another night lacking major news or other developments (save that the US Treasury is now struggling to sell Treasury bills in front of next month’s clash on spending and the debt ceiling).
The NZD at least has shown some movement, dropping over a cent from intra-day high to low and following a small set-back in dairy prices at the latest Global Dairy Trade (GDT) auction. The GDT index was down 3.1% on two weeks ago, including a 4.6% drop in whole milk powder prices. To some surprise, the Canadian dollar sits at the top of the G10 FX leader-board, offshore markets seemingly happier at the fact that there was a decisive election outcome rather than a hung parliament, albeit the new Liberal government under Justin Trudeau was elected on a promise to engage in more bond-financed fiscal spending. That, and a simple case of ‘sell the rumour, buy the fact’ looks to be behind CAD’s gains.
Elsewhere we see the Euro a tad higher, and where a further reduction in hopes for any near term step-up in the intensity or duration of ECB QE followed news that Eurozone banks are, according to the latest ECB survey released overnight, relaxing their standards for business lending. It’s also worth noting that the ECB once again reported a very large Eurozone current account surplus, for August (€17.7bn) albeit a bit down on July and consensus expectations. This serves a s reminder of one factor providing support for the single currency in the current world where investment/capital flows are running relatively light and are subject to periodic bouts of flight (or ‘home bias’). The same applies to the JPY and where Japan is also now running relatively large current account surpluses (see Chart of the Day in the attached pdf – there is one today, promise).
In other market US stocks are in no-man’s land, closing down very small, while Treasury yields are on average about 5bps higher across the curve than this time yesterday. One influence on the latter has been a very strong US housing starts release (+6.5%) albeit building permits were down (-5.0%) and the strength was led by the highly volatile multi-family sector (i.e. apartments).
On the policy maker front, Yellen, Dudley and Powell have all put in appearances but none of them made any comments on the economy or Fed policy. The Bank of England’s Ian McCafferty (who has been dissenting on the MPC in favour of higher rates) repeated his view that the Bank needs to be lifting rates now and risks being behind the curve. Sterling was unmoved. BoE Governor Mark carney meanwhile appeared before lawmakers but spoke only on regulatory matters, and has flagged up his speech later today – on how the Bank of England would handle a UK exit from the EU – as ‘a bit of a yawner’.
Bits and pieces on the calendar today, but its highly questionable if anything here will generate much by way of market excitement.
New Zealand net migration (still running at record levels of late) kicks us off at 08:45 AEST and should continue to tell an important part of the New Zealand macro story to which markets remain largely indifferent.
RBA Assistant Governor Malcolm Edey speaks at ISDA’s annual conference at 9:30 but will likely not touch on the macro economy or RBA policy, unless he chooses to say something in any Q&A.
Skilled vacancy data for September is due but is already superseded by the likes of Seek’s job ads. Japanese trade data will be of passing interest for Yen traders.
The Bank of Canada meets tonight, and who have recently been a little more upbeat on the economy while not giving any suggestion they would be contemplating shifting policy anytime soon. Oil prices, the key source of economic weakness in the past year or more, are little changed from when BoC last met on 9 September. It’s highly unlikely any reference will be made to the change of government, confirmed yesterday.
On global stock markets, the S&P 500 is -0.10%. Bond markets sees US 10-years +4.95bp to 2.07%. On commodity markets, Brent crude oil +0.37% to $48.79, gold+0.2% to $1,176, iron ore -0.7% to $52.93. AUD is at 0.7259 and the range was 0.7242 to 0.7298.
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