It’s a huge week of data in Australia with the RBA and unemployment the headline releases. For the second week running, markets will open the week on tenterhooks wondering where the Greek referendum will take Greece, Europe and global markets.
Leading into Sunday’s vote the, outcome was too close to call. Buut news Monday morning is that the No vote is ahead. While the Government says it will get back to work and start negotiations some investment banks now believe Greece leaving the Euro is a base case. That potentially sets up problems of its own and the potential for extreme volatility in markets.
Australian traders will also be wondering how low the Aussie dollar can go after it broke down and through the 2015 low on Friday night to 0.7508 where it stayed for a good part of the night, before a failed recovery to 0.7540 and a close of 0.7512. My personal trading targets for the Aussie dollar are 0.7440 and then 0.7365/75. The Aussie has opened Monday at 0.7471.
Back to Greece.
The first market to react to the No vote has been forex. That means, just like last week when the Euro lost more than 2% at week’s open, it has opened the week down more than 1% and back under 1.10.
Over the weekend Greek finance minister Yanis Varoufakis doubled down on his attack on European creditors calling them terrorists and saying that Europe would lose €1 trillion if Greece goes under.
So, even now the referendum is behind us and the votes cast, we might not know the long-term impact in Greece for some time.
Volatility is almost guaranteed.
Speaking of which, Shanghai stock punters, Chinese regulators, and the Communist Party, had one of the worst weeks a market can have last week. After cutting rates, encouraging fund managers to support the market, changing margin requirements and after introducing new rules which will let $100 billion of local government pension money loose on the market, the Shanghai Composite still managed to end the week at 3,684, down 11.97%. Over the weekend China rolled out more measures to try to halt the slide. These included cancelling IPO’s and a broker pledge to buy $19 billion in shares were announced. Desperate times, desperate measures.
The bubble has burst. The question is can these new measures stem the losses.
On the data front it’s a big week for local markets with the release of the TD monthly inflation gauge and ANZ job ads on Monday. The market knows Australia doesn’t have an inflation problem, but job ads will be interesting given how strong employment has been lately.
Tuesday morning sees the release of the AIG Performance of construction index and the RBA Board meeting to decide on interest rates. Pretty much everyone expects the RBA to hold rates steady. But the NAB economics team said on Friday that:
The out-performance of the labour market continues to buy more wait and see time for the RBA, even though the economy’s transition remains far from secured, keeping alive the RBA’s stated policy commitment to ease further, but only if needed and not needed now.
NAB expects the RBA will continue to leave the cash rate steady, Thursday’s employment report will reveal whether there has been any growth or lessening of labour market slack for the economy overall.
We’ll get to employment in a minute. The NAB also expects the RBA to include another statement that the Aussie dollar needs to fall further, while Westpac reckons the RBA will harden up their easing bias.
Thursday sees the release of the June employment report, one bright spot in the economy recently. Last month’s outcome of more than 40,000 jobs was so high it was almost ridiculous. In many ways more Australians in work than ever before doesn’t fit with anecdotal evidence about the economy and some give back this month is expected by many economists. The average market expectation is no change in employment. But Westpac reckons 15,000 jobs will be lost.
On Friday housing finance will be released. The investor/owner occupier split will be watched closely.
Looking offshore and besides Greece and its impact, the Bank of England interest rate decision is probably the highlight.
Before that though we see German factory orders released Monday night. Chinese data suggests these might disappoint. But it’s likely to get lost in the maelstrom of post-referendum Greek news. Services PMI and the ISM non-manufacturing are out in the US.
Tuesday sees industrial production data released for the UK and Germany along with Canadian trade data, the Redbook index in the US, and a NIESR GDP estimate for the UK.
Japanese trade and the FOMC minutes are the offshore highlights Wednesday our time and overnight. Thursday sees the release of Chinese CPI and PPI, Japanese machinery orders and money supply. German trade is out Thursday evening as is US jobless claims.
Friday sees UK trade, German wholesale prices and a speech from FOMC chair Janet Yellen.
It’s a big week.
Here’s Westpac’s excellent diary of all the big data and events for the week.