Australian inflation rates remain below the target, signaling no change in interest rates; low business confidence coming from Germany, Italy and France

Apr 25 • Morning Roll Call • 2834 Views • Comments Off on Australian inflation rates remain below the target, signaling no change in interest rates; low business confidence coming from Germany, Italy and France

Yesterday we have seen a lower rise in Australia’s consumer prices, compared to the last quarter, indicating that the central bank may keep the interest rate son hold. According to Craig James from Commonwealth Bank of Australia’s securities unit, it seems that the Reserve Bank will not be interfering with the interest rates soon as the inflation remains low and is still having trouble to get to the 2-3% target band. In addition, Sarah Hunter from BIS Oxford Economics, does not forecast a rate hike until the 4th quarter of 2019, due to the trimmed and weighted mean stuck around 2% and no recent signs of acceleration in headline inflation.

Another news closely monitored yesterday was the German Ifo business climate research which fell for a 5th consecutive month in April, reaching the lowest level in more than a year, suggesting that the biggest economy of Europe is slowing down. In addition, the business morale in France and Italy has deteriorated last month since stringer euro and capacity constraints have limited the output. The German Ifo reading came to 102.1 from previous 103.3 in March, reaching the lowest since March last year. As fund manager from Clairinvest based in Geneva stated, there is definitely a slowdown and the euro is not helping; the ECB is cornered because if they went towards normalization of the rates, the euro would become even stronger and they are having difficulties to talk down the euro. National statistics body of France showed that the industrial morale dropped to 109 points in April as opposed 110 points in March, while in Italy the business morale fell due to the political standoff caused by the inconclusive national elections.

More bad news came from the UK, with the factory order missing the forecast of Reuters poll of economist who anticipated it would pick up to +6, while it remained at a 5 month low of +4. According to CBI’s chief economist, Rain Newton-Smith, manufacturing growth has slowed down this month, but the manufacturers are still enjoying the benefits of lower pound and stronger growth in Europe.

From the US on the contrary, we had an increase in consumer confidence by 1.7 index points to 128.7 in April, which was above the expectations. What the Conference Board’s report indicates is that the trade concerns may be having an optimistic view of the economy due to the steady job and income growth. In addition, the new home sales rose by 4.0% in March to 694k as opposed to the expected 625k, signaling a better than expected sales activity in Q1.

Regarding the macroeconomic news for today, we are looking at a very quiet day for the markets, with important news coming only during the US trading session. Investors will be looking at the US crude oil inventories, followed by Bank of Canada’s Governors Poloz speech.

 

ECONOMIC CALENDAR EVENTS FOR APRIL 25th

CHF Credit Suisse Economic Expectations
USD Crude Oil Inventories
CAD BOC Gov. Poloz Seaks

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