RBA Leaves Interest Rates Unchanged

Daily Analysis - 06/09/2016

Rates Steady as Governor Glenn Stevens Steps Down


The Reserve Bank of Australia held interest rates steady at today’s meeting at 1.50% as expected. It was also the final RBA monetary policy meeting under the guidance of the governor Glenn Stevens, who stepped down for Dr. Philip Lowe - the new RBA governor starting October. The RBA’s monetary policy statement noted that after the August rate cut, interest rates would remain at their current levels in order to achieve the inflation target.

Japan Cash Earnings Rise

Average cash earnings in Japan edged higher for the second consecutive month in July, data from the cabinet ministry showed on Monday. Gross cash earnings grew at a pace of 1.40% in July on a yearly basis, beating estimates of a 0.40% increase. Contractual earnings were seen rising 0.30% on the year after staying flat in June. In a separate report, Japan's services sector activity deteriorated in August. The services PMI fell to 49.6, down from July's 50.40 and indicating contraction in the sector.


Eurozone Composite PMI Growth Rate Falls to 19-Month Low

The final eurozone composite output index showed that the economy continued to expand at a broadly steady pace in August, according to Markit and CIPS. However, the rate of increase fell to a 19-month low in August most due to a weaker rate of expansion in Germany. The Eurozone's composite PMI rose to 52.9 in August which was lower than the preliminary flash estimates of 53.3 and down from July's composite PMI of 53.2.


UK Services Sector Recovers

The UK's services sector returned to growth in August, data from Markit showed on Monday. The services PMI survey showed that the sector rebounded sharply to 52.9 after falling to 47.4 in July. Economists were expecting to see the services sector rise to just 49.0. The 5.5 point increase from July was the largest monthly increase seen in over 20 years. A weaker exchange rate and an increase in tourism were largely responsible. Despite the monthly rebound, third quarter GDP in the UK is expected to stall.


Data Ahead: US ISM Non-Manufacturing PMI

The ISM's non-manufacturing PMI data due for release today at 14:00 GMT is expected to show little to no change. Economists expect the PMI to slip to 55.4, slightly below July's reading of 55.5 and easing from the 8-month high seen in June 2016. The US dollar is likely to be sensitive to the data due to its connection with interest rates and the Fed’s meeting later in September.


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