Originally published by Rivkin Securities
The major US indices closed higher last night, recovering some of the prior day’s losses. The market may be somewhat relieved that a deal has been made to raise the debt ceiling, even if it is only for a further three months. This issue will come up again around the middle of December. North Korean tensions have also deescalated somewhat as President Trump stated that war is not a priority. All of this was negative for gold which fell around $5 per ounce to $1,334. The precious metal is now up approximately US$120 per ounce since the beginning of July.
The Bank of Canada unexpectedly increased interest rates last night from 0.75% to 1.0% which surprised FX markets. The Canadian dollar spiked higher on the news. The Canadian economy is actually quite similar to Australia’s at present with both countries experiencing inflation that is below the 2% target but having a very strong housing sector. The rebound in commodity prices has also helped both countries increase their export values. The Reserve Bank of Australia (RBA) tends not to like surprising the market with unexpected rate changes so I would expect any move by the RBA to be signalled well in advance.
Initial oil inventory data from the American Petroleum Institute indicates that while crude stocks did build last week, the amount was less than expected. Crude builds were expected due to the lower demand from refiners due to the storm related shut-downs. Gasoline stocks decreased but the decrease was smaller than expected. Overall, WTI crude prices responded positively, breaking above $49 per barrel for the first time since early August.
Yesterday’s GDP data showed that the Australian economy grew by 0.8% in the June quarter, a significant improvement from the 0.3% in the March quarter. Today we will get Australia’s retail sales data, which has had a strong run over the last three reported months of data, although forecasts for this month are for a moderate 0.2% growth. Also, the trade balance will be reported with a surplus expected. Another trade surplus would mean that every month of 2017 so far has had a surplus, largely as a result of the increased value of iron ore and coal exports.
Tonight, the ECB will decide interest rates with no change from 0% expected.
Data Releases:
- Australia Retail Sales 11:30am AEST
- Australia Trade Balance 11:30am AEST
- Europe Cash Rate 9:45pm AEST