Daily Commentary BY THE CURVE TEAM –

Employment and Lowe Speech Ahead

12th of October, 2020

There will be anticipated data and events this week, which will give a timely update for the economy and interest rates.

As Victoria’s economy has been in lockdown and the rest of the country has opened up, economic data has varied for the past few months. Overall, the economy continues to improve, albeit at a slower pace and with Victoria as the laggard.

Governor Lowe speaks on Thursday, the same day as employment data for September is released. Consumer confidence for October is also released on Wednesday.

Lowe’s speech is highly anticipated, with a cut of the cash rate, Term Funding Facility rate and 3-year government bond yield target to 10 basis points expected by the market (although not guaranteed). Any perception of this cut being more likely should filter through to rates immediately. Already the 3-year government bond yield is below its 0.25% target, trading at around 0.15% in anticipation of a reduced target rate.

The employment data will be the final read before JobKeeper payments are pared back. A dip in employment is expected for the September period as Victoria’s lockdown bites.

Overseas, updates continue to emerge regarding the US presidential race and stimulus agreements, which we have written about over the past couple of weeks. The hope of stimulus continues to fluctuate, with hopes high on Friday as Trump proposed a $1.8 trillion amount, which was a lot closer to the Democrats desired $2.2 trillion. By Saturday though, hopes had deteriorated again, as the Democrats said talks had stalled.

A Democrat clean sweep in the election is being more widely predicted. This will bode well for passing stimulus payments by at least November after the election. It will have implications for big tech regulation and China policy.

Josh Stewart

Client Relationship Manager