Today's Highlights

  • Central banks seeking evidence before further rate cuts

  • Euro loses ground but Brexit battle over Irish border remains a sticking point

  • US Dollar escapes negativity

 

Current Market Overview

The Reserve Bank of Australia (RBA) made it clear in their meeting minutes, published overnight, that they are seeking further evidence of a need before they cut their base rate any further.  That dented the hopes of those asking for lower base rates and strengthened the Australian Dollar by a cent against the Pound. If rates are falling, then yields are sustained and that is an incentive for international investors to buy or just retain AUD assets.

 

USD unscathed despite negative sentiment

A very similar sentiment was voiced by Eric Rosengren of the US Federal Reserve. He dissented when the Fed cut its base rate in July and is urging other committee members to seek certainty that the global slowdown will impact the US before cutting any further. The USD was unaffected, but we will get a speech from one of his colleagues, Randal Quarles, later today. He is quite well known for hinting at policy changes ahead of times.

The Euro lost a bit of ground yesterday when Eurozone inflation data was a tad lower than forecast. An annualised 1.0% inflation figure was below the expected 1.1%, pulled lower by 0.5% deflation in July. This morning’s rise in German producer prices has stabilised things, but the continuing disagreement between the UK and EU over the Irish border is still dominating the news. It seems no one wants one, but they can’t agree on what the relationship between the north and south of Ireland should look like. That’s a continuation of a 99 year debate and perhaps a 300 year history. Good luck.

 

Sterling remains stoic and awaits support from today’s data

Sterling is stoically clutching on to the $1.21 and €1.09 levels. We are expecting slightly less bad results from the Confederation of British Industry (CBI) Industrial Trends Orders Index this morning, when compared to last month’s minus 34 reading. Any reading above minus 25 would be considered supportive of the Pound.  Of course, anything that points to certainty on the ‘B’ thing would also be supportive.

 

Let the sun shine

And, if Carol Kirkwood is to be believed, which she definitely ought to be, we are in for a very warm bank holiday weekend in the UK. I mention this so you have time to get your sun cream brought up to date and try out your mankini or micro bikini in good time. Or to find somewhere cool to hide from the sun, of course. Somewhere with a bar, perhaps?

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