Financial Market Review for May 01, 2018 Economic data released through the Asian session this morning was on the lighter side, limited to March building consents out of New Zealand and April’s AIG Manufacturing Index numbers out of Australia, with the RBA’s interest rate decision and release of the rate statement the main event of the morning. For the Kiwi Dollar, building consents surged by 14.7% in March, following February’s upwardly revised 6.4% increase. The stats had a muted impact on the Kiwi Dollar, which has been under the cosh as the markets get hawkish ahead of tomorrow’s FOMC. The Kiwi Dollar moved from $0.70345 to $0.70341 upon release of the figures, before rising to $0.7036 at the time of writing, up 0.01% for the day. For the Aussie Dollar, the AIG Manufacturing Index slipped from 63.1 to 58.3 in April, the stats coming out ahead of the RBA’s monetary policy decision. Five of the seven activity sub-indexes expanded in April, but at a slower pace than in March, though new orders, production and sales held above 60, supporting a positive outlook for growth over the near-term. The exports sub-index contracted, with employment slowing in the month. Six of the eight sub-sectors reached record highs in trend terms. Input prices slipped, while holding above 60, with the wages sub-index also easing, while holding above the long-run average. While input prices and wages were on the softer side, selling prices were on the rise, providing some hopes of a pickup in inflationary pressure following the disappointing 1st quarter numbers. The Aussie Dollar moved from $0.75297 to $0.75341 upon release of the figures, the softer headline figure having a muted impact with new order and production figures continuing to point to positive growth outlook. The RBA held rates unchanged as had been forecasted, with the tone of the rate statement the key driver for the Aussie Dollar this morning. Key points from the rate statement included: Inflation remains low and in line with the Bank’s expectations and likely to remain low for some time, reflecting low growth in labour costs and strong competition in retailing. Bank expects growth to pick up to average over 3% in 2018 and 2019, which should reduce some spare capacity in the economy. While business conditions are positive and non-mining business investment is on the rise, uncertainty over the outlook for household consumption remains, in spite of a pickup towards the end of last year. Household income has been growing slowly and debt levels are high.
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