Daily Update - 6th September 2017
The RBA announced its September interest rate decision, holding rates at 1.5%, which was in line with market expectations and the forward guidance provided in previous policy meeting minutes, with the markets more eager to slice and dice the RBA Rate Statement accompanying the decision to gauge what lies ahead, AUD strength and ongoing concerns over the labour market and rising household debt outpacing wage growth issues faced by policy decision makers. Italian, Spanish and French Services PMI numbers have come in below their estimates this morning. As a result, the Euro has traded slightly lower against the U.S Dollar and is below 1.19. The dollar was further pressured on Tuesday after Fed Governor Lael Brainard said the U.S. central bank should go so far as to make it clear it is comfortable pushing prices modestly above the Fed’s 2-percent target. Looking ahead of the day, the central bank torch will be passed to BoC. The last time Bank officials gathered to decide on monetary policy, they judged it right to raise the benchmark interest rate by 25bps, in line with market expectations. The tone of the statement accompanying the decision was on the hawkish side, with the Bank dismissing the until-then soft inflation as being temporary. Most importantly, policymakers kept the prospect of further near-term hikes on the table. As for the economic data on Wednesday, Australia's GDP print for Q2 will be in focus. In the US, the ISM non-manufacturing PMI for August is due out and the forecast is for the index to have risen somewhat after declining significantly in July. Something like that could be encouraging news for FOMC policymakers, and would likely be another piece of data entering the basket of those supporting the case for another rate hike this year. That said, as we have noted countless times, the main determinant of whether another hike will indeed materialize this year may be US inflation data.Yesterday’s Focus
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