03/01 Wednesday | 00:30 GMT | AUD Gross Domestic Product (4Q)
Australian growth unexpectedly declined by -0.5% q/q in Q3’16, the sharpest decline in growth in eight years. Attention is naturally tuned into the Q4’16 reading, although anyone looking for the start of a recession – what would be the first in over twenty years – looks to be disappointed. Recent trade, housing, consumption, and business investment figures all suggest that growth should have finished the year on stronger footing. Current estimates are calling for the quarterly GDP rate to have increased to +0.7%, while the annualized growth rate to have increased from +1.8% in Q3 to +2.1% in Q4. The ongoing rebound in commodity prices should continue to help the Australian economy stabilize in the near-term.
Pairs to Watch: AUD/JPY, AUD/NZD, AUD/USD
03/01 Wednesday | 01:00 GMT | CNY Manufacturing PMI (FEB)
The official Chinese Manufacturing PMI is expected to tick a fraction lower in February to 51.2 from a prior month’s 51.3. A reading above 50 indicates expansion while a number below 50 signals contraction.
According to Bloomberg News, January’s figures confirm that the China’s recent recovery is on-track despite the recent housing market slowdown and a reduction in fiscal support. Official figures showed Chinese GDP grew +6.8% on the year in the fourth quarter while the economy grew by +6.7% in the full year. The GDP figures also highlighted that China is continuing to move away from export and investment-led growth and is relying more on domestic consumption to grow its economy.
Pairs to Watch: AUD/JPY, USD/CNH
03/01 Wednesday | 02:00 GMT | US President Trump’s SOTU Address
US President Donald Trump will address a joint session of Congress on Tuesday evening in Washington D.C., in his first State of the Union Address. While the speech will coverage a wide range of issues, there are only a few that markets care about – tax reform, infrastructure spending, and plans to repeal/replace/rename/repair the Affordable Care Act/Obamacare. The large promises made before the November 8 election and lack of specific policy details since the January 20 inauguration have been working against the US Dollar, in effect due to the prospect of any fiscal policy goals not being accomplished immediately. Under the IS-LM-BOP model, an increase in deficit spending should precipitate tighter monetary policy. With only two priced-in at present time (June and December), and a coin-flip for one in March, should US President Trump put some ‘meat’ on the ‘bones’ of taxes and infrastructure, and outlining a specific timeline in particular, then there is a strong chance that markets reassess their current expected timeline of Fed rate hikes this year.
