Kieran Salsone

RBA manages to keep inflation under control

Australia: 

The Reserve Bank of Australia has broadly maintained its 2-3 per cent per annum target band for the consumer price index. 

The wording of yesterday's agreement between Treasurer Morrison and the new RBA Governor Philip Lowe was adjusted to emphasise the flexible and medium-term nature of the RBA's inflation target.

Share Markets: 

It was a fairly quiet night with markets awaiting the US Federal Reserve and the Bank of Japan (BoJ) monetary policy meetings on Wednesday.

Consensus forecasts are for the Fed to be on hold, but a hawkish statement could set the tone for rate hike later this year.

For the BoJ, markets are divided on whether it will provide monetary policy stimulus. It might be that it is running out of policy options. The S&P500 was flat and the Dow was down 0.02%. 

Interest Rates:

US treasuries mostly traded sideways, although yields edged up later in the session.

The 10-year yield rose 2 basis points to 1.71%. Pricing for a Fed rate hike in September continues to suggest around a 20% probability and a 53% chance of a hike by December.

Australian 3-year bond yields (based on futures) rose 3 basis points to 1.62%, and the 10-year rose 4 basis points to 2.17%.

Foreign Exchange:

The US dollar index edged lower ahead of the key Federal Reserve meeting this week.

The Australian dollar conversely rose to an intraday high of 75.7 US cents. The RBA minutes are on the local calendar today, but there will unlikely be much significant action in currencies until the Federal Reserve meeting.  

Commodities: 

Oil prices lifted on talk that OPEC was committing to a freeze in production, although there was scepticism about the deal.

Copper prices fell on concerns on oversupply. Meanwhile gold prices lifted as the US dollar edged lower.

China:

Property prices rose in 64 of 70 major Chinese cities in August according to the National Statistics Bureau, up from 51 cities in July.

Reuters reported that the average new home prices in the 70 major cities rose by 9.2% in the year to August, up from 7.9% in the year to July.

New Zealand: 

Consumer confidence rose to 108.0 in Q3, from 106.0 in Q2, according to the Westpac McDermott Miller measure.

While the pickup is encouraging, consumer confidence remains a little below average levels.

The performance of services index rose to 57.9 in August, from 54.5 in July. The reading is further above 50 signalling more rapid expansion in service sector activity in August.

United Kingdom:

Rightmove house prices lifted by 0.7% in September, after falling by 1.2% in August. For the year to September, house prices rose by 4.0%, down slightly from a 4.1% increase in the year to August.

United States:

The NAHB housing market index rose from 59 in August to 65 in September, the highest reading in 11 months. The lift in home builder's sentiment suggests that housing activity will pick up through the September quarter.


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