FINANCIAL MARKET REVIEW FOR AUG 07, 2018
Economic data released through the Asian session this morning included July’s BRC retail sales figures out of the UK and June household spending numbers out of Japan, with the RBA’s August interest rate decision and release of the rate statement also in focus through the morning. For the Japanese Yen, household spending fell by 1.2% year-on-year following May’s 3.9% slide, which was in line with forecasts, while month-on-month, household spending surged by 2.9%, coming in well ahead of a forecasted 1.7% rise, following May’s 0.2% fall. Year-on-year, the fall in household spending was attributed to sizeable declines in spending on: Culture & Recreation (-8.2%); fuel, light & water charges (-6.0%); medical care (-4.8%) and housing (-3.6%), with spending on other consumption expenditures also on the slide. Partially offsetting the June fall were notable rises in the following: Education (+10.4%); Furniture & household utensils (7.7%) and Transportation & communication (+3.4%). While year-on-year spending saw the downward trend continue for a 5th consecutive month, a 9.4% rise in disposable income, year-on-year, coming off the back of wage growth rising at the fastest pace in 3-years, will certainly be considered a positive for the BoJ, supporting a more upbeat outlook towards domestic consumption and ultimately inflation, though it’s too early for any hopes of a shift in BoJ policy. The Japanese Yen moved from ¥111.345 to ¥111.35 against the Dollar, upon release of the figures, before rising to ¥111.34 at the time of writing, up 0.05% for the session. For the Aussie Dollar, the RBA held rates unchanged as anticipated. Salient points from the rate statement included: The RBA forecasts for the Australian economy remains unchanged, with GDP growth expected to average just above 3% for 2018 and 2019. Business conditions are positive and non-mining business is continuing to increase, with higher public infrastructure investment supporting the economy. Uncertainty remains over household consumption, with household income growing slowly amidst high household debt levels. While terms of trade are expected to decline over time, they are likely to stay at a relatively high level. The outlook for the labour market remains positive, vacancy rate high, with other forward looking indicators supporting positive growth in employment. Wage growth remains low and expected to remain so for a while though now considered to have troughed, with skill shortages supporting upward momentum. Inflation has been in line with Bank expectations, with forecasts pointing to a pickup in 2019 and 2020. Low levels of interest rates continues to support the economy, with progress on reducing employment and returning inflation to target likely to be gradual. The Aussie Dollar moved from $0.73924 to $0.73971 upon release of the statement, before rising to $0.7396 at the time of writing, up 0.12% for the session, the statement continuing to raise concerns over household debt, tepid wage growth
vinsonfinancial.com | (+357) 250-288-6163 | general@vinsonfinancials.com
FINANCIAL MARKET REVIEW FOR AUG 07, 2018 and now a shift in housing sector conditions. For the Kiwi Dollar, focus towards this week’s RBNZ monetary policy decision weighed early, the Kiwi down 0.06% to $0.6729, with only quarterly inflation figures due out on Wednesday capable of shifting market expectation of a dovish RBNZ on Thursday. In the equity markets, it was a mixed bag, with the CSI300 and Hang Seng enjoying another positive start to the day, the pair up 1.53% and 0.96% respectively, while the Nikkei was up just 0.6%, the gains coming off the back of further upside in the U.S markets overnight and in spite of continued market concerns over a prolonged trade war between the U.S and China. Bucking the trend was the ASX200, which was down 0.36% at the time of writing. For the EUR, economic data out of the Eurozone is limited to June industrial production and trade figures out of Germany. Following some particularly disappointing June factory order numbers on Monday, a slide in industrial production figures and a narrowing in Germany’s trade balance at the end of the 2nd quarter would add further pressure on the EUR, which has already pulled back to $1.15 levels. While Juncker may have averted an EU – US trade war, a prolonged trade war between the U.S and China is expected to impact the global economic environment, which leaves the German and ultimately Eurozone economy susceptible to any slowdown outside of the region. At the time of writing, the EUR was up 0.03% to $1.1557 with today’s stats in focus through the morning. For the Pound, economic data scheduled for release later this morning is limited to June house price figures, following the release of the BRC’s July Retail Sales Monitor in the early hours that showed retail sales up by just 0.5%, falling well short of a forecasted 1.5% and June’s 1.1% increase. The Pound moved from $1.29444 to $1.29443 upon release of the figures, the timing of the release tending to lead to a delayed response, the European open likely to see the markets respond to yet more soft numbers, following last week’s manufacturing and service sector PMI figures. At the time of writing, the Pound was flat at $1.2944, with negative sentiment towards the Pound expected to linger until there is, either a turnaround in progress on Brexit or economic data begins to impress. Across the Pond, economic data is limited to June’s JOTLs job openings that will provide some direction for the Dollar later in the day, the softer nonfarm payroll numbers for July raising market sensitivity to today’s numbers. At the time of writing, the Dollar Spot Index was down 0.03% to 95.325, with today’s stats and noise from the Oval Office in focus For the Loonie, key stats scheduled for release this afternoon are limited to July Ivey PMI that is forecasted to be Loonie positive and should support a hold at C$1.29 levels against the Greenback, recent stats out of Canada having continued to support a hawkish BoC. While focus will be on the stats, any NAFTA chatter would likely overshadow any positive stats in spite of the BoC Governor’s assurances that policy would be uninfluenced by progress on NAFTA.
vinsonfinancial.com | (+357) 250-288-6163 | general@vinsonfinancials.com