Most of the talk in dealing rooms all around Australia Monday is going to be about the Australia – New Zealand Cricket World Cup final (and what happened to the Kiwi batting middle order).
But, even though Federal Parliament is in its pre-Budget recess there will be plenty of discussion in the wider Australian polity about the implications for prime minister Tony Abbott following Mike Baird’s New South Wales election victory for the Liberals.
Economically, it shows that with the right salesman, hard reforms can be “sold” to the electorate. It almost guarantees we’ll see more of the softer sides of Joe Hockey, Mathias Cormann and, no doubt, Scott Morrison, as the government pursues its budgetry agenda a little less aggressively. It should also mean a few less budget surprises.
Politically, SMH columnist Mark Kenny reckons that for the PM, the result “gives the space he needs to rebuild authority in the partyroom and the electorate, where he is unpopular. But Baird’s comfortable win could yet be awkward for Abbott due to the differences it points up. Namely, the electoral insulation a government gains from having a popular leader, and the overwhelming value of keeping faith with voters.”
Turning to the markets it’s a fairly quiet pre-Easter week on the data front in Australia. There is only HIA new home sales and private sector credit on Tuesday, AiGroup performance of manufacturing and building permits on Wednesday and TD inflation data Thursday to trouble the scorers.
However, that doesn’t mean it’s going to be a quiet week on markets.
On forex markets, last week’s acute volatility in the US dollar, which saw it trade through a range of 1.0790 and 1.1050 against the Euro, and 118.21 to 120.11 against the Yen, left traders perplexed as to whether its rally is over or we are just seeing the calm before the next move higher. On Sunday the Chinese central bank governor said the continuation of QE globally “may push the dollar too high” and create asset bubbles.
Most market players still believe the US dollar is heading higher.
It’s going to be an interesting start to the week for the Aussie dollar after the bulls completely abandoned it in the last few trading sessions and it ended New York trading at the lows of 0.7745 on Saturday morning Australian time.
On the data front globally, German CPI is out Tuesday, before the hugely important US personal income and and consumption data. That’s crucial in helping determine when the Fed will be tightening.
Bill Evans, Westpac’s chief economist, wrote on Friday that he had been at a speech by San Francisco Fed president John Williams and spoke with him afterwards. Evans noted Williams took the Chair when Janet Yellen moved to Washington and was a voting member of the FOMC this year. That’s important because Williams left Evans with a clear understanding that the Fed was on track to raise rates this year.
“We saw a coherent highly credible and influential member of the FOMC setting out an argument that would certainly advocate the beginning of the tightening cycle by June,” Evans wrote.
We’ll have a clear indication and better feeling on Good Friday(!!!), when the BLS releases non-farm payrolls data for March. I’ve just checked the last non-farms, released on March 6, and it says at the end “the Employment Situation for March is scheduled to be released on Friday, April 3, 2015, at 8:30am (EDT).”
In the meantime in the US we’ll see the release of pending US homes sales next week along with the Chicago PMI, Case-Shiller house prices and consumer confidence as well as the ADP employment survey, ISM Manufacturing and factory orders.
Also out next week are Markit PMIs around the globe, Japanese construction, vehicle production and Tankan. In Germany we’ll see CPI, retail sales and unemployment.
And of course stocks will do what stocks do and mostly be closed when the most important piece of economic data is released. It sets up a big week after Easter.
Here is Westpac’s excellent diary of all the data and events that matter for the week ahead.