Economic Data and Brexit to Keep the Pound Front and Center

Earlier in the Day:

It’s was a busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Aussie Dollar were in action, with economic data from China also in focus this morning.

On the geopolitical risk front, U.S – China tensions remained in focus. TikTok’s sale deadline is up, with Huawei entering a new era under the watchful eye of the U.S administration.. From midnight on Monday, suppliers now require an approved license to supply Huawei. This not only impacts U.S suppliers but also Huawei’s Asian suppliers including Taiwan Semiconductor Manufacturing Co. All non-U.S suppliers that use American tech will be required to apply for a license to continue supplying Huawei.

For the Kiwi Dollar

The Westpac Consumer Sentiment Index fell from 97.2 to 95.1 for the 3^rd quarter.

According to the 3^rd quarter survey,

• Sentiment slipped back to levels last seen during the 2008 Financial Crisis.
• An increasing number of households are reporting a deterioration in their financial position. The current financial situation sub-index fell from -13.2 to -16.9.
• Low levels of confidence are weighing on spending appetites, seen across all age groups and income brackets. This was reflected in the “Good time to Buy” sub-index which fell from 1.5 to -2.5.
• The expected financial situation sub-index fell from 14.7 to 11.2, to fall below the long-run average 11.4.
• For the economic outlook, the 1-year economic outlook sub-index rose from -28.3 to -26.3.
• By contrast, the 5-year economic outlook sub-index fell from 11.6 to 9.9, sitting well below the long-run average 28.8.

The Kiwi Dollar moved from $0.67001 to $0.66942 upon release of the numbers. At the time of writing, the Kiwi Dollar was flat at $0.6700.

For the Aussie Dollar

In the 2^nd quarter, the House Price Index fell by 1.8%, reversing a 1.6% rise from the 1^st quarter. Economists had forecast a 1% decline.

Key this morning, however, was the release of the RBA meeting minutes.

Salient points from the RBA Minutes included:

• Growth in housing credit to owner-occupiers had eased in recent months, while housing credit to investors had continued to decline.
• This was a reflection of demand from borrowers, given the weak and uncertain economic environment.
• Members noted that, in addition to weak demand for household and business borrowing, the supply of credit had also tightened.
• While an economic recovery was underway, it was likely to be uneven.
• Uncertainty about the health situation and the future path of the economy was continuing to affect the spending plans of households and businesses.

On the monetary policy front,

• Members reviewed the operation of the TFF and agreed to increase the size and to allow the drawing of funds until June 2021.
• They also considered it likely that fiscal and monetary policy support would be required for some time given the outlook for the economy and the labor market.
• Affirming its commitment to support jobs, incomes, and businesses, the Board agreed to maintain highly accommodative settings as long as required.
• The Board will also continue to consider how further monetary policy measures could support the recovery.

The Aussie Dollar moved from $0.72731 to $0.72982 upon release of the stats and the minutes. At the time of writing, the Aussie Dollar was up by 0.26% to $0.7307.

Out of China

Key stats included fixed asset investment and retail sales figures for August. Fixed asset investment and unemployment figures were also in focus.

Fixed asset investments fell by 0.3%, year-on-year, following a 1.6% decline in July. Economists had forecast a 0.4% decline.

Industrial production rose by 5.6%, following a 4.8% rise in July. Economists had forecast a 5.1% increase, year-on-year.

Retail sales rose by 0.5% in August, year-on-year, following a 1.1% decline in July. Economists had forecast a 0.1% rise.

Finally, the unemployment rate fell from 5.7% to 5.6%.

The Aussie Dollar moved from $0.7304. to $0.7312 upon release of the stats.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.08% ¥105.65 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include September ZEW Economic Sentiment figures for Germany and the Eurozone.

2^nd quarter wage growth figures for the Eurozone and finalized inflation figures for France and Italy are also in focus. We would expect these stats to have a muted impact on the EUR, however.

Expect the Economic Sentiment figures to be the key drivers on the day.

At the time of writing, the EUR was up by 0.08% to $1.1875.

For the Pound

It’s a particularly busy day ahead on the economic calendar. Key stats include August claimant counts and July’s unemployment rate.

Average earnings and 3-month rolling employment change figures are also due out but likely to have a muted impact on the Pound.

Away from the economic calendar, Brexit will remain a key driver.

At the time of writing, the Pound was down by 0.11% to $1.2832.

Across the Pond

It’s also a relatively busy day ahead for the U.S Dollar. Key stats include August industrial production figures and September NY Empire State Manufacturing Index numbers.

Other stats include August import and export price index numbers that will have a muted impact on the day.

With the markets a little edgy over the sustainability of the economic recovery, expect dire numbers to drive demand for the safe havens.

On the geopolitical risk front, there’s also chatter from Beijing and Washington to muddy the waters.

The Dollar Spot Index was down by 0.04% to 93.011 at the time of writing.

For the Loonie

It’s another quiet day ahead, with key stats limited to July manufacturing sales figures.

The stats are unlikely to have an impact on the Loonie, leaving the IEA’s monthly report to provide direction.

From elsewhere, expect stats from China and the U.S and geopolitics to also provide direction on the day.

At the time of writing, the Loonie was up by 0.12% to C$1.3160 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.