Fundamental Analysis – 18/09/2015

Good Evening,

RBA’s Glenn Stevens talked the Aussie down for a while, saying the lower AUD is now having a bigger impact on the economy. Australia’s exit from a decade-long mining boom has brought with it many challenges for the resource-rich economy, with growth slowing, unemployment rising, and confidence levels wavering. But policymakers are optimistic that Australia will make it through the commodity downturn without too much pain, with support from monetary policy and the weaker exchange rate. The RBA believes that continuous improvement in non-mining growth is what is needed to bring down the unemployment rate. Australia’s unemployment rate has wavered around 6% for the last year, which is better than the RBA forecast six months ago, according to Stevens. Stevens also said that monetary policy is seeking to support Australia’s growth transition. Australia’s interest rates are currently at record low levels. Bank of Japan’s August monetary policy meeting minutes: the country’s economy is expected to continue to recover moderately, but there are downside risks to the recovery. Asian markets were mixed with Nikkei suffering nearly -2% losses. AUDUSD trading at 0.7219 while USDJPY trading at 119.86.

Canada Bank of Canada Consumer Price Index Core (MoM) meets forecasts (0.2%) in August. The official data released in Canada on Friday showed the cost of living as measured by the consumer price index (CPI) rose 1.3% year-on-year as expected. Gold jumped due to dollar weakness and is back above 1130. Fed showed explicit worries over the recent global economic developments. As mentioned in the statement, "recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term". While affirming the risks to the outlook as "nearly balanced", it pledged to be "monitoring developments abroad". At the press conference, Chair Janet Yellen added that "when there are significant financial developments, it is incumbent on us to ask ourselves what is causing them. And of course while we can't know for sure, it seemed to us as though concerns about the global economic outlook were drivers of those financial developments". Yellen was obviously concerned about the slowdown in China and the policymakers handling the problems there. She noted that "developments that we saw in financial markets in August in part reflected concerns that there was downside risks to Chinese economic performance and perhaps concerns the deftness with which policymakers were addressing those concerns". USDCAD trading at 1.3131 while Gold trading at 1,136.78.

European indices are generally lower with DAX down -3.06%. Eurozone current account surplus narrowed to EUR 22.6b in July.

Daily Performances;

I hope you all have a nice evening.

All the figures are as at the writing time.