Market News & Analysis

Reserve Bank in focus ahead of meeting; Chinese new year celebrations underway

Feb 4, 2019 | Market Update

Today’s high impact economic news:

11:00 AUD MI Inflation gauge m/m
11:30 AUD ABS Building Approvals m/m
11:30 AUD ANZ Job Advertisements

Chinese markets closed – Chinese New Year celebrations.

CURRENCIES:

It’s Monday morning in Australia and all eyes are on the Reserve Bank ahead of tomorrow’s monetary policy meeting. It’s widely anticipated the RBA board will keep interest rates on hold until 2020, with the central bank indicating its next ‘move’ will be higher. Despite this, some analysts still believe the Reserve Bank has scope to cut interest rates this year amid weak business and consumer sentiment and plummeting house prices. The slowing of China’s economy and its impact on local exports could also sway the Reserve Bank’s decision later this year.
The language used in tomorrow’s monetary policy statement will have a direct impact on the Australian dollar. The AUD finished last week higher after the U.S. Federal Reserve left its own interest rates on hold while citing a more dovish approach to the unwinding of fiscal stimulus. The AUD rose more than 100 pips over two sessions against the USD, before the greenback clawed back losses on Friday on the back on strong non-farm payroll data.

EQUITIES

The United States economy added more than 300,000 jobs in January, smashing expectations. As a result, Wall Street stocks rose with the Dow Jones climbing 64 points while the S&P 500 closed flat, up 2 points. A sell-off in Amazon shares, however, saw the Nasdaq close 0.25% lower. Australian shares will follow Wall Street’s lead at the open with the SPI Futures up 20 points at 09:00 AEDT. Bank stocks will be in focus throughout the session, as the banking Royal Commission prepares to release its final report on the findings, after the close.

DATA DROP

On the data front, the Australian Bureau of Statistics will release its monthly building approvals data for December. The number of new building approvals issued is expected to rise 2.1% after plunging more than 9% in November, hitting a 5-year low. Chinese markets will be closed this week for Chinese New Year celebrations.

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