Key Events to Focus On This Week
Reserve Bank of Australia (RBA) Rate Decision
China Consumer Price Index (CPI) y/y
China Trade Balance
Global Macro Brief
Asian data will not surprise market too much this week
There will be little economic releases this week, and probably the most important ones would be the RBA rate decision and China’s CPI. However, little surprise or impact is likely to happen.
The RBA is likely to keep the interest rate unchanged this week because the central bank needs at least a few months to examine the real economic effect of the easing policy. Recent policy guidance suggested no change in stance, with the RBA Governor Glenn Stevens mentioned in last month that everything was right at the moment. He also indicated that the significant moderation in the Chinese growth had been intended, in contrast with the sudden slump experienced at the end of 2008. From the China’s side, the CPI should not bring a sharp upside risk which is likely to stay around 1.8-1.9%, and if so, it still remains supportive for further monetary easing. Weak raw materials price signals a weaker demand, and supports for further easing measures to be applied to avoid the deterioration in the employment market as well.
Euro Zone’s development might continue to dominate risk appetite
In the Euro Zone, Greece and the European Commission (EC), ECB, International Monetary Fund (IMF) troika agreed on the need to boost policy efforts to support the economy and comply with bailout terms, together with the upbeat US NFP. The market may isolate the unclear move by the ECB. However, the ECB and the EU leaders’ directions are the main concerns to drive the sentiment. German Chancellor Angela Merkel has been soft recently because she seems to start supporting the bond purchase programme. However everything could be turned negative as long as the “vigorous conditions applied” are attached.
The direction could be unclear this week because there are no significant events. Traders are likely to flip here and there to adjust the positions.
United States
US Non-Farm Payrolls (NFP) in July nearly put quantitative easing (QE3) off the table; risk appetite improves after jobs data
The US jobs expansion in July beat the majorities’ forecast by an increase of 163,000 followed by a revised 64,000 gain in June. The data clearly informed the investors that the Federal Reserve (Fed) was unlikely to be further aggressive in my point of view, and I have mentioned the ZERO chance of quantitative easing (QE3) given the reasons below:
Though employment in Q2 has been slowing down, it has not deteriorated to the level such as 2010 when the jobs creation showed a tremendous contraction.
The US bond market has been partly benefited from the Euro Zone’s crisis, and because of the currency bloc’s turmoil, the US is able to enjoy the ultra low rate in a prolonged period, and the borrowing cost keeps hitting the record low.
Liquidity is not an issue in the US financial system. The real problem is the corporate demand due to the soft earnings and potential “fiscal cliff”.
Political war. Given the election is held in November, it might not appropriate for the Fed to be further aggressive in the political concern.
Source: BloombergClick the image to enlarge
No panic does not mean optimism is coming back in the coming weeks or months because I expect the cautious outweighs until the jobs market and unemployment rate improve sharply although it probably takes time because deep recession in Europe and the US fiscal policy likely threaten the demand in the US. On the flip side, the Euro Zone’s turmoil directly or indirectly benefit the US Treasury’s demand due to its safe nature and the yield is going lower; none of the fiscal cliff elements could be settled directly by the monetary policy.
While stronger payroll jobs growth in July shuts the voice for QE3 temporarily; in the 1 August FOMC statement, it said that it will provide additional accommodation as needed to promote stronger economic recovery and sustained improvement in labour market conditions. A rise in the unemployment rate in July at 8.3% certainly does not tell anything meaningful at this stage because it might just due to that more people are back in the jobs searches.
Stocks and commodities rallied after the stronger than expected jobs report. Dow Jones Equities Index closed at 217 points higher and the Morgan Stanley Capital International (MSCI) Asia Pacific indices trade sharply higher today.
Australia
Reserve Bank of Australia (RBA): Further adjustment is likely, but not this week
The RBA has cut its policy rate by 125 bps in the past 10 months. The last cut of 25 basis points was on June 5. With the global economy in a substantial slowing down and commodity demand is highly relevant to the Australian economy, more easing is likely be granted, but I do not think it is going to arrive.
Early easing from the RBA has some positive impact on the Australian economy but the fundamentals have not really changed. The only improvement among the different economic indicators is the unemployment rate, while investment lending and employment expansion did not really improve in a satisfactory manner
No panic does not mean optimism is coming back in the coming weeks or months because I expect the cautious outweighs until the jobs market and unemployment rate improve sharply although it probably takes time because deep recession in Europe and the US fiscal policy likely threaten the demand in the US. On the flip side, the Euro Zone’s turmoil directly or indirectly benefit the US Treasury’s demand due to its safe nature and the yield is going lower; none of the fiscal cliff elements could be settled directly by the monetary policy.
While stronger payroll jobs growth in July shuts the voice for QE3 temporarily; in the 1 August FOMC statement, it said that it will provide additional accommodation as needed to promote stronger economic recovery and sustained improvement in labour market conditions. A rise in the unemployment rate in July at 8.3% certainly does not tell anything meaningful at this stage because it might just due to that more people are back in the jobs searches.
Stocks and commodities rallied after the stronger than expected jobs report. Dow Jones Equities Index closed at 217 points higher and the Morgan Stanley Capital International (MSCI) Asia Pacific indices trade sharply higher today.
Australia
Reserve Bank of Australia (RBA): Further adjustment is likely, but not this week
The RBA has cut its policy rate by 125 bps in the past 10 months. The last cut of 25 basis points was on June 5. With the global economy in a substantial slowing down and commodity demand is highly relevant to the Australian economy, more easing is likely be granted, but I do not think it is going to arrive.
Early easing from the RBA has some positive impact on the Australian economy but the fundamentals have not really changed. The only improvement among the different economic indicators is the unemployment rate, while investment lending and employment expansion did not really improve in a satisfactory manner
.
Source: BloombergClick the image to enlarge
Source: BloombergClick the image to enlarge 
Source: BloombergClick the image to enlarge
The underlying CPI in the middle of the year stands at 2%, which just in the lower band of the RBA’s annual inflation target at 2-3%. With that said, the ample upper band’s space still offers the RBA enough room to cut the interest rate if they wish to, but I do not expect it to happen tomorrow because:
the RBA needs to examine the real effect of the rate cut and stimulus they have done so far this year, and it takes months
the Q2 inflation is not deteriorated to a drastic extent
Thus the rate cut tomorrow by the RBA should take a miss this round. The further rate cut is likely towards the end of the year, due to the external factors such as:
Euro Zone’s turmoil
China’s soft growth rate
The IMF also commented last month that the downside risk for China will be huge due to the economy is over-replying on the investment, and echoes China’s Prime Minister Wen Jia Bao’s statement that domestic consumption need to be improved, and high property price is the major threat to spur the consumption
The underlying CPI in the middle of the year stands at 2%, which just in the lower band of the RBA’s annual inflation target at 2-3%. With that said, the ample upper band’s space still offers the RBA enough room to cut the interest rate if they wish to, but I do not expect it to happen tomorrow because:
the RBA needs to examine the real effect of the rate cut and stimulus they have done so far this year, and it takes months
the Q2 inflation is not deteriorated to a drastic extent
Thus the rate cut tomorrow by the RBA should take a miss this round. The further rate cut is likely towards the end of the year, due to the external factors such as:
Euro Zone’s turmoil
China’s soft growth rate
The IMF also commented last month that the downside risk for China will be huge due to the economy is over-replying on the investment, and echoes China’s Prime Minister Wen Jia Bao’s statement that domestic consumption need to be improved, and high property price is the major threat to spur the consumption
.
Source: BloombergClick the image to enlarge
The relatively high Aussie currency in the past 2 years causes the import price deflation as well. With that said, the actual inflation could be higher if the Aussie dollar trended lower later on by any kind of reasons. Thus, I believe the RBA will definitely put it into their consideration for the monetary policy
Source: BloombergClick the image to enlargeThe relatively high Aussie currency in the past 2 years causes the import price deflation as well. With that said, the actual inflation could be higher if the Aussie dollar trended lower later on by any kind of reasons. Thus, I believe the RBA will definitely put it into their consideration for the monetary policy
.
Source: BloombergClick the image to enlarge
This Week You Suggested Trade With : Disclaimer The analysis we provide is based on the average estimate of price movements in one day. Does not guarantee what we deliver is actually a proper and correct. Everything that happens in the decisions you make on your trading transaction is to be Your responsibilities. Visit Us www.deryworldscorp.web.id
This Week You Suggested Trade With : Disclaimer The analysis we provide is based on the average estimate of price movements in one day. Does not guarantee what we deliver is actually a proper and correct. Everything that happens in the decisions you make on your trading transaction is to be Your responsibilities. Visit Us www.deryworldscorp.web.id
No comments:
Post a Comment