It’s a holiday in Sydney and Brisbane today so trade will be thin – but Melbourne is still in so here is a quick look at what is going on from the NAB Strategy Team:
- The US Government shutdown continues, with no progress over the weekend to end the Budget impasse. However there was some good news on Saturday, after US Defence Secretary Chuck Hagel announced that he was ordering almost all of the 350,000 furloughed defence workers back to work. Hagel said he based his decision on a Pentagon interpretation of the Pay Our Military Act, which was passed just a few weeks ago.
- Meanwhile the House of Representatives voted 407-0 to pass legislation that ensures all furloughed workers will receive full pay back-dated to the start of the shutdown once a budget is passed, which should lessen the overall hit to the economy.
- On Friday night there were no US payrolls data, but equity markets drifted higher, with the Dow up 0.5%, S&P 500 up 0.7% and the Euro Stoxx 50 up 0.9%. Supporting markets were reports that House Speaker John Boehner had told colleagues that he wouldn’t allow the current impasse to trigger a US debt default.
- Despite the US fiscal uncertainty, the USD found some support towards the end of the US session on Friday, as the EUR fell through previous support levels. The USD index closed the week at 80.10, a decent bounce from mid-week lows close to 79.60. The EUR/USD broke through support at the 1.3580 level to end the week just below 1.3560.
- The AUD was relatively steady on Friday night, trading between 0.9420 and 0.9460, and has opened up this morning near 0.9440. Today is a public holiday in NSW, ACT, QLD and SA so there will not be much to drive markets today, although there is key local data later this week.
- On the weekend, Australian capital city auction clearance rates remained solid, with the Sydney clearance rate at 80% and Melbourne at 71%.
This week is a key one for the domestic policy outlook. After the bounce in both business and consumer confidence last month, this week’s readings will be crucial to determine if the improvement in confidence has been sustained, or if it was just a short-lived bounce around the time of the election.
The NAB Business Survey for September is released on Tuesday, while October consumer sentiment is out on Wednesday.
On Thursday the employment report for September is released, although the impact of the Federal Election will blur the true state of the labour market. We are expecting a 30,000 increase in employment, with most of those jobs being part-time workers employed for the Federal Election on September 7. The unemployment rate is expected to remain at 5.8%.
There is no clarity on when the US non-farm Payrolls data will be released. If the shutdown is resolved soon then Payrolls could possibly be released later this week.
Source: NAB Economics
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