Yesterday’s RBA Minutes with its dovish take and concerns about the activity side of the economy saw the local rates market move to price in a higher above-50% probability of an August RBA move (from 59% to 63%), adding to some already evident selling of the Aussie toward and below 0.75 overnight.  It’s trading just above the figure in early trade this morning.  Commodity prices have been mixed overnight, base metals up 0.91%, iron ore down 1.48%, and gold up 0.25%.  The VIX index was down 0.47 to 11.97.

Overnight news has if anything, added a little to yesterday’s RBA Minutes-inspired selling of the AUD, equities down 0.48% for the Eurostoxx 600 index and by 0.14% for the S&P 500.  The Dow bucked the trend, up 0.14%, supported good gains in McDonald’s, Pokemon-inspired with McDonalds teaming with Nintendo to become the first company to own “sponsored locations” (in Japan) in the game, Nintendo launching the game in Japan today.  Quarterly results from Johnson and Johnson were also well received.

The USD has garnered some further support, aided by solid US housing data for June that saw a modest re-pricing of the US Fed funds futures toward higher rates.  There was also an article from noted Fed watcher Jon Hilsenrath of the WSJ suggesting the Fed is giving serious consideration to raising rates as early as September given relatively solid US economic reports, though not at next week’s FOMC meeting.  The Atlanta Fed’s GDPNow estimate for Q2 remained at 2.4% after the housing report.

The IMF downgraded its forecasts for UK and European growth in its WEO forecast update, sufficient to shave its global growth forecasts by 0.1% for this year and 2017 (to 3.1% and 3.4% respectively) despite no assumed impact on China and the US and emerging markets doing somewhat better.  The Fund had been looking to revise up its global growth outlook ahead of the Brexit referendum.

In Europe, the ZEW Investor Survey for Germany and the EC was much weaker than expected in July, with both the Current Situation and Expectations components much weaker than expected, reflecting Brexit uncertainty.  Both the Euro and the GBP are somewhat softer this morning.

The Global Dairy Auction overnight rose 1.9% adding some support to the NZD though it remains below levels prevailing when the RBNZ released its consultation paper yesterday morning tightening up on housing lending.

Coming up

For the local market today, there is only the Westpac Leading Index and Skilled Vacancies.  The UK monthly labour market tonight’s might get some interest, though it’s pretty much pre-Brexit readings.  One usually second tier data point worth watching tonight is the EC Consumer Confidence measure, this one for July and thus post-dates the Brexit referendum.  It’s expected to be marginally worse, to -8.0 from -7.3, and at that level not at all outside recent ranges; it’s been between -3.6 to -9.7 since the start of last year; skewed toward the lower end of that range this year.

The markets in the US session be paying continuing attention to the reporting season with Morgan Stanley, American Express, Intel and eBay all reporting their Q2 results.

First thing tomorrow morning, the RBNZ will release a special inter-meeting economic assessment ahead of the 11 August RBNZ rates meeting.  Yesterday’s tightening of housing LVR changes now provide “cover” for the RBNZ to re-focus their monetary policy sights on the NZD with a now more active easing bias, given the higher than assumed NZD presenting downside risks to the Bank’s inflation forecasts.

Overnight

On global stock markets, the S&P 500 was -0.14%. Bond markets saw US 10-years -2.92bp to 1.55%. In commodities, Brent crude oil -0.53% to $46.71, gold+0.2% to $1,332, iron ore -1.5% to $56.02. AUD is at 0.7505 and the range since yesterday 5pm Sydney time is 0.7478 to 0.7517.

Good luck.

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•  Markets Today:  20 July 2016 (PDF 115kb)

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