Aussies hold but are watching jobs
Overnight the Reserve Bank of Australia has kept rates at 2.00% as was widely expected. Data from the Australian economy has been strong in the previous quarter and a continuation of that, specifically in the labour market, will keep AUD supported. Much like every other central bank the RBA weighed in on the global policy outlook, commenting that the key to further monetary policy decisions will be “whether the recent financial turbulence portends weaker global and domestic demand”.
Sterling back on the slow grind
Sterling was driven higher nicely by yesterday’s manufacturing PMI as sector growth surprised to the high side. While weakness was still seen in the oil and energy generation side of the industry – given low oil prices and relatively mild weather – manufacturing businesses that are focused on the consumer are making up for that. This is positive for the Services number tomorrow morning.
Some businesses continued to say that the strong pound is continuing to hurt export operations, particularly against the euro. Leading into March they are unlikely to get much respite if the European Central Bank deems the inflation picture poor enough to loosen policy at their March meeting.
The pound will need to be closely watched once again today as we expect PM David Cameron to announce further details of his negotiations with the EU. Anything that solidifies and clarifies Cameron’s desired changes to the EU should make the case for a June/July EU referendum vote that much stronger.
We also receive the latest Construction sector PMI at 09.30 with the flood and storm damage in North England likely to have lifted civil and repair work.
The Day Ahead
Eurozone unemployment also released later this morning is expected to show that the continent’s wider labour market is still struggling. We had hoped to see increases in hiring in the manufacturing PMIs from Eurozone member states yesterday but we could not depend on them. Inflation is negligible in countries with far tighter labour markets than the Eurozone so the ECB, and more importantly European governments, have a lot of work to do.
The ISM reading of the US manufacturing business continued to show that poor oil prices and the very strong dollar are having a negative impact on wider export manufacturing, although we expect this to fade through the year.