Author: Rowan Murphy
What a night! US President Trump one step closer to potential impeachment proceedings, Trump also lamb basted everything he doesn’t like (at the moment) through a speech at the UN general assembly, the UK Supreme Court rules UK Prime Minister Boris Johnson’s decision to suspend UK Parliament last month was “unlawful” and the Aussie Dollar rallying off the back of the Governor Lowe’s speech last night. Today attention turns to the RBNZ rate decision this afternoon.
Let’s start with Trump, Speaker Nancy Pelosi announced overnight that the House would begin a formal impeachment inquiry of President Trump, saying that he had betrayed his oath of office and the nation’s security in seeking to enlist a foreign power for his own political gain. This is in response to allegations that he pressured Ukraine’s President to begin a corruption investigation into former Vice President Joe Biden. Ms Pelosi said that Mr Trump’s reported actions, and his administration’s refusal to share details about the matter with Congress, have left the House no alternative outside of impeachment. The impact on markets from that event was softened somewhat, after the US President stated he would be releasing the transcript of the telephone conversation at the centre of this controversy. Nevertheless, the news proved a blow to market sentiment, with US political risk now added to the market’s growing list of risk factors.
Last night the UK Supreme Court ruled that UK Prime Minister’s decision to prorogue (suspend) parliament last month was “unlawful”, on the grounds that it “had the effect of frustrating or preventing Parliament from carrying out its constitutional function”. The decision will likely see the immediate recalling of UK Parliament, and puts another obstacle in the way of a hard-Brexit, this was a risk on signal to markets with the GBP rallying.
Of local importance, RBA Governor Philip Lowe delivered a speech titled “An Economic Update” at the Armidale Business Chamber last night. Governor Lowe ‘talked up’ the fundamentals of the Australian economy, suggesting it’s now at a “gentle turning point” and gave little indication that an interest rate cut was in the immediate offing, potentially disappointing economists expecting one within days. Governor Lowe did say the RBA would “at our board meeting next week, …again take stock of the evidence”. The market judged Governor Lowe’s speech to be more hawkish than anticipated, consequently the implied chance of a rate cut next week has fallen to 63% with the AUD rallying slightly.
The RBNZ meet and take centre stage in our time zone today. After shocking markets last month with a rare 50 basis point cut, the market believes that the RBNZ will be sitting on its hands this meeting with current market pricing reflecting a 15% chance of a 25 basis point cut. A familiar “wait-and-see” language is expected from the central bank following its decision, as the impacts of its cut last month works its way through their economy.
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