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A High Impact News Week

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Markets are in for a roller coaster week of important data, bringing some much needed volatility and trading opportunities. The first week of the new month, as always, is heavy with important central bank announcements and PMI data. The focus early in the week will be on the Australian dollar, however later in the week the news flow centres around the ECB meeting on Thursday and US Non-Farm Payrolls on Friday.

Chinese PMI figures were the first major data to affect the Australian dollar this morning. The manufacturing data confirmed that China’s manufacturing sector is still expanding, though at a slower pace than the previous month and below expectations. The Manufacturing PMI and HSBC Final Manufacturing PMI came in at 51.1 and 50.2 respectively. The ABS also released company operating profits data, which showed a decrease of 6.9% – the largest decrease since 2009. The AUD is up slightly on the news at 0.93340.

Still to come this week for Australian news will be tomorrow’s RBA Cash Rate Decision and Wednesday’s GDP figure and speech by Glenn Stevens . The RBA is not expected to make a move on interest rates due to the conflicting data coming out on the state of the Australian economy, and the RBA allowing for time for interest rate cuts to assist the process of rebalancing away from the mining boom. The RBA has also signalled that it is likely the language of policy statements should be changed from signalling a ‘period of interest rate stability’, in advance of any actual policy shift. However, even if no change is evident, it will be of interest to traders to see if this statement wording is altered in any way this month.

The quarterly GDP figure is expected to remain low, at only 0.4% – consistent with the RBA’s expected period of lower than trend growth while interest rate cuts take a firmer hold. With record low interest rates putting pressure on house prices, and growth and inflation remaining low there does not yet appear to be a strong driver for a change in the cash rate. Nevertheless, Governor Stevens may take the opportunity to jawbone the currency when he speaks at the Economic Development luncheon on Wednesday.

Aside from the heavy Australian data flow, the PMI figures out of the UK and US should provide some focus for traders in the lead up the important end of week data from the ECB and US. UK PMI’s are released on Monday, Tuesday and Wednesday beginning with Manufacturing , then Construction and finally Services PMI – the figures are forecast to show continues expansion at 55.1, 61.5 and 58.6 respectively. US ISM Manufacturing PMI is also expected to show moderate expansion – the figure anticipated to be 57.0 by a survey of economists.

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