Market Watch, Sept. 11
Market Strategist Evan Lucas says central banks and jobs will be the focus this week.
There are plenty of events to watch this week including another central bank meeting, employment data, purchasing managers indices and inflation reads.
I want to concentrate on two parts of this list: central banks and Australia' employment data.
BoE: It's the turn of the Bank of England this week, not one I normally watch. However there are growing signs that the ‘effects' of Brexit have not played out as hard as the BoE forecasted – Governor Mark Carney had stated before Brexit that he was interested in normalising policy, however he backed off from this to take a very dovish stance post-Brexit. Could he finally relax and turn neutral or even hawkish?
However, the reason for drawing attention to the BoE from an Australian perspective is the UK's growth and inflation are similar to that of Australia. Although the UK economy is rather different to ours, the mandate for the BoE is very similar to the Reserve Bank's and a change in policy could see a reaction similar to the reaction of the Bank of Canada moving rates last week – a higher $A and pressure on the RBA to begin tightening.
Australian employment: The employment change figures remain as volatile as ever, meaning come Thursday's release one should look through the headline employment change to the 12-month average.
This chart form the RBA is the best way to gauge employment in Australia. On a trend basis, for the first time since 2012, full-time employment is growing at a faster rate than part-time. Can this continue? Full-time employment is a key part of the employment read and if this trend does continue current forecasts around growth of wages will be met.
However, if the trend of average hours worked continues to fall and participation remains subdued, the increase in full-time employment will be offset by the fact wage growth is not materialising therefore the RBA's inflation forecasts will not be met.
Watch for positive or negative reaction in the $A on the release of the data.
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