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AFEX Market Watch - 18th April 2019

What Happened Yesterday
• AUDUSD traded above 0.7200 for the first time since February 21st before quickly falling back. The catalyst was a better than forecast Chinese GDP and industrial production data release. The industrial number was a really curious one and has subsequently attracted mistrust due to a spike from 5.3% y/y in March to 8.5% y/y. Odds of an RBA rate cut this year have receded.

• US Federal Reserve member Bullard said that the economic boom is not over but that the Fed must tread carefully when considering future rate hikes. He revealed he was not supportive of the December ’18 rate hike. America’s trade deficit unexpectedly narrowed as exports increased more than imports. The services sector recorded a larger than expected surplus.

• UK inflation missed forecasts and house prices increased at their slowest pace for six years. Earlier in the day New Zealand had also announced a smaller than expected quarterly inflation reading which led AUDNZD to a five month high. European inflation figures met forecasts but remain far below target. Canada’s central bank must have their finger on the rates trigger after another build.

Major Risk Event
The European Union published a list of $20bn-worth of American exports to target with tariffs. Last week the Trump administration released its own list of European goods to hit with levies. The spat stems from a 14-year-old dispute over subsidies given to rival aerospace firms Boeing and Airbus. On Monday EU countries voted to start formal trade talks with America.

Today’s Agenda
• Australian employment numbers are released at 11:30am. The RBA minutes, published on Tuesday, hinted at rate cuts if unemployment rises or inflation falls. A slight increase in the jobless rate is expected. If this is the case and participation continues to grow there will be little to worry about. Coincidentally the next major local data release after this one is inflation on Wednesday.  

• PMIs for manufacturing and services are released in Europe. French services and German manufacturing are set to remain in negative territory. The ECB will be forced to keep policy unchanged at least until Mario Draghi’s presidency ends in seven months’ time. PMI numbers in America are likely to remain in positive territory according to economists.

• US Retail Sales are likely to increase by 0.9% m/m which would be the strongest monthly reading since October 2017. But, after two dreadful readings in the last four months, sales will have still gone backwards over the period even if this estimate is met. UK retail sales is also in focus. The sector has been pretty resilient of late which is surprising due to the uncertainty of Brexit.

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