Market Update – 14th November 2018 – NAB Business Confidence Disappoints Again, Wages Index At 11.30am

NAB Business Confidence disappointed once again yesterday morning, coming in at 4, below the previous months reading and continuing a trend of declines which began way back in May 2017 when NAB Business Confidence peaked at 13. The soft Business Confidence numbers coincide with stubbornly poor retail sales figures, concerns about global growth and trade, tight credit and a quickly deteriorating local housing market which is unfortunately all dragging on our economy and the Aussie Dollar. The AUD is typically a currency that outperforms when optimism is high and growth strong, but right now we are seeing the opposite hence the AUD’s decline over the better part of this year. In fact since late January we have dropped a full 900 points or 9 cents vs. the Greenback from 0.8100 to about 0.7200.

Overnight the AUD held up reasonably well finishing a tad higher vs. the Greenback than this time yesterday. U.S equities finished mostly lower by about 0.2%, while the NASDAQ followed Europe to finish higher. The German DAX was the best performer in Europe ending the session 1.3% higher. Commodities prices mostly held their ground excluding energy prices which were led lower by a rout in oil prices that saw WTI wipe around US$5 a barrel off its price. Expect the Saudis and OPEC to cut production and boost prices as the Saudi’s look to increase the price of oil leading up to their IPO of Aramco in 2021.

The latest Wage Price Index is due out this morning at 11.30am with Aussie economists expecting to see flat growth in wages of about 0.6% for the latest quarter. Wages growth has been in decline since the GFC around 2008 when we averaged about a 1% increase in our salaries quarterly but in the space of 10 years we’ve seen that growth decline by about half as China slows and the great mining super cycle came to an end in the early part of this decade.

I like to be optimistic about things and think that this perfect storm of low wages growth, soft retail sales and deteriorating housing market is our economy bottoming out, sort of like being in the trough in a cycle with the climb to the peak ahead. Better times are certainly coming and the RBA agree with their forecasts continually ticking higher with each meeting.

AUD EXCHANGE RATES:

AUD/USD – 0.7178

AUD/GBP – 0.5529

AUD/EUR – 0.6362

AUD/NZD – 1.0639

AUD/JPY – 81.713

USD/BTC – $6,263

OTHER MARKETS:

All Ords (XAO) – 5,922

Gold – A$1,665/oz

Silver –  A$19.39/oz

WTI – US$55.19/barrel

DATA RELEASES TODAY:

AUD – Wage Price Index q/q at 11.30am

GBP – CPI y/y at 8.30pm

USD – Core CPI m/m at 12.30am (tomorrow morning)

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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick – 0431 278 632 

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