Daily Commentary BY THE CURVE TEAM –

Geopolitical Tensions Continue To Capture Focus

4th of September, 2017

There was a lot to digest over the weekend as geopolitical issues continued to grab headlines. On Friday night, markets were gyrating on the back of the contrasting data releases in the US. It come ahead of a key week of data and Fed speakers.

North Korea has been put back in the spotlight over the weekend after reports stating the country had successfully tested a hydrogen bomb with intercontinental missile capabilities. As a result, market sentiment shifted towards safe haven assets.

Back to Friday and there was some more data out of the US. Following a strong lead up after the bumper ADP employment report two nights earlier, Non-farm payrolls undershot expectations with a gain of only 156,000 and the unemployment rate edged higher to 4.4%.

On the other hand, the US ISM manufacturing index printed above expectations for August with 58.8. Conditions are looking positive for the Fed to announce the unwinding of the balance sheet in September, however we will need to see a larger pick up in wages and inflation if we are to see another rate hike in December.

Moving to Europe and as we lead into next week’s meeting of the ECB Governing Council, the recent strength of the Euro could play a major part in the timing of the asset tapering program. Rather than shock the markets and announce immediate action, it is looking likely that the ECB will take a cautious approach and allow the market time to digest. It is expected that the decision won’t be finalised until December.

Company profits and inventories for Australia are released today and this will tie in nicely as we lead into Wednesday’s Q2 GDP figure.

Oliver Parsons

Client Relationship Officer