After an incredible week when the Aussie dollar traded above 80 cents and the ASX200 traded both sides of its 5,750-6,000 range, it’s going to be another big week on local markets with plenty of data and events.
Locally the highlight is going to be the release of the RBA Board’s decision on monetary policy, and the associated statement from Governor Stevens, at 2.30pm Sydney time on Tuesday.
As it stands the market and the commentariat has moved back to the expectation that the RBA will cut after a media article last week suggesting a cut is coming had all the hallmarks of an offical leak, or what you might call backgrounding.
The article argued the RBA sees a “weak” economy in need of further help. That doesn’t appear to fit with the recent data flow, but even those who think the RBA might hold, like NAB chief economist Alan Oster, still think they are likely to cut rates again.
So, in many ways it’s a semantic argument about the timing of the next cut – not the cut itself.
Bill Evans at Westpac has remained the most vociferous proponent for the cut and expects “the Board will decide to cut the cash rate from 2.25% to 2.00%.” He notes that while the data flow has improved and iron ore has “recovered” that “while there are some ‘mitigating circumstances’ I expect that the recent surge in the AUD would be viewed quite dimly by the folks at the Reserve Bank.”
We’ll know on Tuesday.
But there are plenty of other catalysts for market movements along the way. Australian traders also have to deal with the release of the TD monthly inflation gauge on Monday, Australian trade data, HIA new home sales, and the AiGroup performance of services index prior to the RBA release Tuesday. On Wednesday we get retail sales and I can’t wait to see if last month’s 0.7% surge is followed by another strong result. The market is looking for a rise of just 0.4%, slightly below the six-month average.
Thursday sees the Australian employment report which, after last month’s strong rise of 37,700, has the market forecasting a fall of 5,000. Westpac is looking for a fall of 10,000 but the NAB is more optimistic looking for a rise of 12,000.
On Friday, we get the release of the RBA’s quarterly Statement on Monetary Policy (SoMP) which is widely expected by many to set out reasons the RBA will, by then, have cut rates to 2%. It is in many ways more a backward-looking document than something useful for forecasts – as the last two board meetings showed – but the market will pay particular attention to what the RBA says about the trend for growth and what assumptions they use about interest rates.
What a week.
We are also getting closer to Australia’s federal budget with Joe Hockey due to step up to the dispatch box to deliver his second budget on Tuesday May 12th. With just a week to go we’d expect more discussion over the coming days about the budget deficit and revenue-raising or savings measures.
While traders are assailed by multiple domestic stimuli there is a raft of important economic data releases offshore which will keep markets moving around the world.
Monday sees the release of HSCB and Markit manufacturing PMIs for China, and the nations which were closed on Friday for Mayday. Wednesday is employment in New Zealand, services PMI, EU retail sales and the release of ADP employment in the run-up to Friday’s non-farm payrolls in the US.
Thursday is massive in the United Kingdom, with the country voting in a general election. The pound lost 2 cents against the US dollar in the final two days of last week. The pressure is on as traders worry about political instability in the UK.
Friday is the big one however with the release of US non-farm payrolls. But we’ll also see the release of Canadian employment and Chinese PPI.
It’s a huge week on global markets, and we’ll have live coverage of the all the key points, including the RBA statement on Tuesday and retail sales on Thursday, here on Business Insider.
Here’s Westpac’s excellent weekly diary of all the key data and events.