It’s the biggest week on the Australia data calendar in years: RBA, GDP, retail sales, the trade balance and all the partials that feed into the Q1 GDP release.
It’s just huge.
Looking at the RBA first there is almost universal agreement that it is too soon after the May rate cut to 2% for a follow up cut. That’s even after the weak Capex data last week, which showed how deep the hole left by the mining boom has become.
Last Friday Bank of America Merrill Lynch chief economist for Australia Saul Eslake told Business Insider that the Capex data had not increased the chances of a recession in Australia and he thought the economy high point for unemployment has passed.
He thinks the RBA is on hold as does Westpac’s chief economist Bill Evans who said that even though he thinks the RBA will hold they retain a ‘soft easing bias’ But it’s an easing bias he expects the RBA to act on later this year with “50bps rather than the market’s
current 25bp expectation.”
The easing bias makes the release of each of this week’s key data points a potential trigger for bond, currency and stock market volatility on local Australian markets as traders try to judge whether the data flow reinforces or undermines the likelyhood the RBA will act on that bias.
GDP on Wednesday, even though it is backward looking at growth in the three months to March, has an important role to play in market pricing. Capex last week suggested that the starting point for the pick up in domestic growth was lower than previously thought. GDP was already expected to print 0.5% for the quarter taking the year on year rate to 2%.
That will support a rate cut.
But, retail sales have been picking up with consumer confidence, so the market will be watching closely on Thursday to see if there is a stronger print than last month’s release, which showed a rise of just 0.3%. Building permits are also important given building construction and house prices appear to be the one real area of economic strength.
Company profits, inventories, net exports and public demand along with the TD Inflation report and the AiGroup performance of manufacturing, services and construction are also out.
Globally, the release of the Markit and HSBC PMIs will dominate the start to the week. China is out Monday and the market will be looking closely at the pace of the economic slowdown. Europe and the US are out Monday night.
Also out Monday are US personal consumption and spending data for April which will be an important lead after the weak Q1 GDP released Friday. ISM manufacturing – the original PMI – is also out.
Also out this week is German unemployment, EU CPI and the HSBC andMarkit services PMIs for Asia and around the world.
Thursday is a big day with the release of the BoE interest rate decision before the week ends with the release of EU GDP, which will be huge for the Euro and forex traders.
That’s at 7pm AEST. Then at 10.30pm Friday US non-farm payrolls are out.
Of course the Greek drama continues to play out. Barclays New York based strategist Michael Gapen said in a note to clients “the clock is ticking on an agreement for Greece ahead of repayments to the IMF at the end of June.” He noted that threr is” no clear sign that a deal acceptable to all sides is emerging.” So watch this space.
Now, here’s Westpac’s excellent weekly diary of all the key data and events.