Daily Commentary BY THE CURVE TEAM –

Positive Offshore Developments Open Big Week of Local Policy Updates

4th of November, 2019

Key developments and data out of the US sets a positive tone as local markets open ahead of a big week for Monetary Policy.

US non-farm payroll data out late Friday significantly beat expectations by the market with 128K jobs added vs 85K expected. This combined with comments from both sides of the trade dispute saw markets close the week on a positive tone. Whilst not directly of importance for the local economy is certainly positive to see strong employment growth in the worlds largest economy.

The key for Australia from the release was gains in yields of US treasury after the announcement. With markets still processing the US rate cuts last week these gains have somewhat offset that effect in the AUD. That has mitigated some of the risk for RBA that the AUD may appreciate in the short term.

With the RBA set to meet tomorrow ahead of the Quarterly Statement on Monetary Policy out Friday, the market is pricing a very slim chance of a further cut in the short term. It appears the market has taken the view that the RBA will now wait and give the economy some time to process the recent rate and tax cuts prior to taking further action. The updates to the RBA’s forecast in the quarterly SoMP will also be of keen interest and should give some insight to the course of monetary policy over the next few months.

Matthew Dunshea

Client Relationship Manager