The ructions from last week’s FOMC decision to drop any reference to “patience”, whilst not becoming “impatient”, will continue to dominate trade on Australian markets this week after Friday night’s strong close for stocks and commodities and a big fall in the US dollar.
It sets up a solid open to the week Monday with futures indicating a 28-point rally on the ASX. But with the US dollar weakening, the price of commodities such as oil, gold and copper were also sharply higher.
This, combined with a continuation of the global interest rates rally, could push the ASX up and through the elusive 6,000 level.
It’s likely to be another volatile week on currency markets as the US dollar bulls and bears do battle. The Aussie dollar is back at 0.7774 after challenging 78 cents briefly on Friday night. The Aussie’s fate is not its own, however, as the big moves in the major currency pairs since the FOMC decision are all about US dollar sentiment and whether or not all of the good news, and then some, has been priced into the US dollar.
Locally, it’s the last week of Federal Parliament before it rises for the pre-budget break, and the last week of campaigning in the New South Wales election, with Australia’s most populous state going to the polls on Saturday. That sets up another week of political point-scoring. NSW Liberal leader Mike Baird appears to have enough momentum and a big enough margin to be returned, but his federal counterparts are still regrouping after another scrappy week in Canberra with the defeat of the university deregulation bill in the Senate.
With the education savings joining the scrap heap alongside the Medicare co-payment, the Prime Minister and Treasurer look set to walk the same path as their predecessors in presiding over budget deficits.
On current polling, it’s highly unlikely that the Liberals will lose power in NSW on Saturday. That’s a scenario that would have widespread ramifications for the Liberals nationally, following the LNP’s defeat in Queensland.
On the data front, it is an extremely light week here in Australia while there are a few important global data releases. Locally, the highlight is the RBA’s Financial Stability Review which will be released on Wednesday. It’s likely that this might see more airing of the RBA’s concerns about Sydney property prices and investment lending more broadly.
Offshore Tuesday is ‘flash’ manufacturing PMI day and we also get the Chinese Leading index. UK and US CPI are both out and both very important in the wake of the BoE and Fed inflation comments last week. Wednesday’s US Durable Goods will be important on gauging the health of the economy while German IFO is out earlier that night. Thursday we’ll see the Gfk consumer confidence data out of Germany along with French GDP and UK retail sales. Friday is both Japanese GDP and the third read of US Q4 GDP which the market is expecting to print 2.2% annualised.
It’s going to be an interesting week.
Here’s Westpac’s excellent calender of all the important events this week.