Daily Market Digest: RBA Minutes, UK Inflation, US Data Dump

Market Summary

• RBA meeting minutes offers no new surprises; AUD extends gains
• UK inflation climbs to a 20-month higher in July 2016
• ZEW: German economic sentiment rises 7.3 points
• US headline inflation stays flat in July on a month over month basis

Today’s Economic events

• RBA releases monetary policy meeting minutes
• Australia new motor vehicle sales m/m -1.30% vs. 3.50% previously
• UK CPI y/y 0.60% vs. 0.50%; Core CPI y/y 1.30% vs. 1.30%
• UK PPI input m/m 3.30% vs. 0.60%; PPI output m/m 0.30% vs. 0.30%
• Eurozone ZEW economic sentiment 4.6 vs. -6.3
• German ZEW economic sentiment 0.5 vs. 2.1
• Eurozone trade balance 23.4bn vs. 23.2bn
• Canada manufacturing sales m/m 0.80% vs. 0.80%
• US CPI m/m 0.0% vs. 0.0%; Core CPI m/m 0.10% vs. 0.20%
• US housing starts m/m 2.10% vs. 0.60%
• US building permits m/m -0.10% vs. 0.50%

Coming up:

• (USD) Capacity utilization rate
• (USD) Industrial production
• (NZD) Employment change q/q; Unemployment rate
• (NZD) PPI Input; PPI Output

AUD gains on RBA meeting minutes

The RBA released the minutes of the meeting from the August 2nd monetary policy today, which ended with the central bank cutting interest rates further by another 25bps to 1.50%. The minutes said, “Economic growth was expected to pick up to be above estimates of potential by mid-2017.”

 

Australia 10Yr Yields: 1.877%

The minutes did not spring any surprises but was broadly seen as being upbeat. Sluggish inflation remained the main theme with ongoing low inflation expectations likely to push the rate cuts even lower over the coming months.

In the quarter ending June 2016, Australia’s consumer price index was recorded at 1.0%, below the RBA’s target band of 2 – 3% with the minutes showing “Underlying inflation was expected to remain low for a time before picking up gradually as spare capacity in labor and many product markets diminished.”

The RBA’s meeting minutes showed that lower housing market prices also played a role in convincing the policy members to lower interest rates. “At the same time, members noted that indicators for the established housing market in the first half of 2016 had pointed to an easing in conditions, including lower housing credit growth and an easing in housing price pressures,” the minutes showed.