The Reserve Bank of Australia left Cash Rate at 2 percent as weakness in the Australian dollar has cushioned the blow of China’s weakness and lower commodity prices.
Australian GDP revealed its weakest growth in two years as it posted 0.2 percent in the second quarter, mainly due to the weakness in export volumes, the latest report from the Australian Bureau of Statistics showed. Retail Sales posted an unexpected 0.1 percent dip in July, the first monthly decline since May 2014. Trade Balance report showed a lower-than-expected deficit of –AUD2.46 billion (analysts were expecting –AUD3.10 billion).
The European Central Bank also kept its minimum bid rate unchanged at 0.05 percent on Thursday. In the press conference, ECB chief Mario Draghi said the bank is lowering its inflation and growth forecasts. Inflation is expected to pick up slightly towards the yearend, he noted. The ECB also mentioned that it has changed its rules regarding the limit on bond issue share, increasing the limit to bond issues the central bank can hold to 33 percent from 25 percent.
In other news, the UK Manufacturing PMI came in at 51.5 for August, following a small increase to 51.9 in July. Net Lending to Individuals stood at GBP3.9 billion as expected. On the other hand, Construction PMI came in close to expectations at 57.3 (57.6 forecast).
In the United States, Chicago PMI came in at 54.4 versus 54.7 expected. ISM Manufacturing PMI registered its lowest reading since June 2013 at 51.1, while ISM Non-Manufacturing PMI came in at 59.0. Jobless Claims in the prior week increased 282,000, 9,000 more than the median forecast. The Non-Farm Employment Change showed an increase of 173,000 in August, disappointing and diverging from the 215,000 forecast. Average Hourly Earnings picked up 0.3 percent, and Jobless Rate eased to 5.1 percent.
Gold sellers won for the second week but not much new ground has been covered this time. Downside risk remains, as price has not recovered the $1,200 level despite the big pushes seen in August. $1,200 will remains an area for buyers to conquer moving forward.
After an enduring multi-month slide, a volatile week saw Oil move, for the most part, between the $43 and $49 zone. The move this week was not surprising given the relentless downside force exerted on black gold. Bulls need a move through $50 to keep this going.
EURUSD is back to its normal trading range after a wild end to the month of August. The pair is back below the 1.1400 resistance level and some buyers are attempting to poke through it again. It retains it bullish bias as long as price is below 1.1100.
GBPUSD posted its ninth straight bearish day on Friday as sellers attempt to push for a 1.5100 break. This pair would remain in seller’s territory if bulls won’t be able to bring this back above 1.5500. Let’s see if that would be a tall order for bulls, given the recent slump.
USDJPY posted its third consecutive bearish weekly close but this time it was engulfed by the prior huge weekly bar. Due to the recent JPY strength, this pair has a short-term bearish bias while price is below 122. Medium term, this pair is bullish as long as it remains above 120.
The Week Ahead
On Monday, keep an eye on Australia’s ANZ Job Advertisement; Japan’s Leading Indicators; Switzerland’s Foreign Currency Reserves; and Germany’s Industrial Production. Canada and the US will celebrate Labor Day.
Tuesday will offer Japan’s Current Account and Final GDP; Australia’s NAB Business Confidence; China’s, France’s, and Germany’s Trade Balance; Switzerland’s Jobless Rate; and US NFIB Small Business Index.
Wednesday will be much more active with Australia’s Westpac Consumer Sentiment and Home Loans; UK Halifax HPI, Manufacturing Production, and Trade Balance; Canada’s Building Permits, BOC Rate Statement and Announcement; and US JOLTS Job Openings.
Thursday will be extra busy with RBNZ Rate Announcement, Monetary Policy Statement, and Press conference; Japan’s Core Machinery Orders; Australia’s jobs data; China’s CPI, PPI, and New Loans; UK MPC’s Asset Purchase Facility and Official Bank Rate Votes and Rate Statement; US Unemployment Claims and Import Prices.
Friday will cap the week with Japan’s BSI Manufacturing Index; Germany’s WPI and Final CPI; ECOFIN Meetings; US PPI and Preliminary UoM Consumer Sentiment.