The Sterling made headlines last week, plunging to its 7-year low on fear of “Brexit”. Fresh poll pointed to the scale tipping towards “Brexit”, with the “Bremain” camp still having a slight edge. Market is pricing in the possibility of UK exiting the European Union. The Cable had lost 3% since last week and is trading around 1.3850 at the time of us writing this article. It is only less than 4 pence from the historical low of 1.35. We expect the on-going tug-of-war between “Brexit” and “Bremain” to add pressure to the Sterling; the bears are likely to force it towards the historical low.
ANZ Business Confidence dropped from 23.0 to 7.1. The Kiwi opened with a 50 pips gap lower than last Friday’s close, on expectation Reserve Bank of New Zealand (RBNZ) will push forward their rate cut. The Global Diary Trade (GDT) Price Index has fallen for 4 consecutive months. If tomorrow’s data points to further weakening in prices of diary products, it will fuel rate cut expectation pushing Kiwi further down.
The Shanghai Composite Index fell close to 6% last week and fell 4% in the first 30 minutes of trading today. The Aussie has been holding up surprisingly well against the weakening of its largest trading partner. The two main reasons, we identified, are:
- Scaling back of Fed rate hike causes weakness in the US Dollar.
- Recovery in Oil price boosts commodity currencies.
Reserve Bank of Australia (RBA) is scheduled to announce its interest rate and monetary policy tomorrow. Although China is facing some issues, Australia is doing fine domestically as shown in their employment data, retail sales and CPIs in recent months. We do not expect any rate cut this time round and RBA is likely to remain open to further easing if the need arises.
Crude Oil prices are creeping up. WTI hit past $34 a barrel on Friday but failed to hold on to the gain. With no further development on the “production freeze” proposal initiated by Saudi Arabians and Russians, $34 a barrel looks like a limit unless there is further catalyst to propel it beyond.
The Greenback has been a sidekick ever since market scaled back on the expectation of the Fed’s tightening cycle. The Dollar bulls are eyeing on Non-Farm Payroll at the end of the week to rekindle the candle in the wind of possible rate hike in March. We believe numbers has to hit above 200K and unemployment rate to remain below 5.0% to create any spark of hope.
Top News This Week
Australia: Cash Rate. Tuesday 1st March, 11.30am. – We expect figures to remain unchanged at 2.0% (previous figure was 2.0%).
UK: Manufacturing PMI. Tuesday 1st March, 5.30pm. – We expect figures to come in at 52.1 (previous figure was 52.9).
US: Non-Farm Employment Change. Friday 4th March, 9.30pm. – We expect figures to come in around 180K (previous figure was 151K).
Fullerton Markets Research Team
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