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Markets await ECB Rate Decision tonight

Published September 12, 2019

Author: Steve Oram

The Australian dollar  climbed to a six-week high in late sessions on Wednesday to levels not seen since July 31. The Aussie often a proxy for Chinese assets, rallied on expectations that its main trading partner China will introduce more policy measures to stave off a sharper slowdown.  The euphoria has eased overnight to see us open again at yesterdays levels versus the greenback but keeping gains against most other crosses.

Australian consumer sentiment turned pessimistic in September with confidence falling 1.7% as individuals concerned about their personal finances outweighed optimists, despite signs of a recent pick-up in the housing market. The dismal data follows the business confidence and conditions report which also saw weakness. Markets are expecting a further 2x rate cuts to 0.50% by early 2020

China is seeking to ease the impact of the trade war by exempting certain US goods from the 25% tariffs put in place last year. The Chinese tariff retaliation strategy is focused heavily on curbing trade of agricultural and manufactured goods produced in US states key to President Donald Trump’s re-election chances

Overnight the US Producer Price Index rose 0.1% in August, according to the Bureau of Labor Statistics today. Final demand prices moved up 0.2% in July and 0.1% in June. On an unadjusted basis, the final demand index rose 1.8% for the 12 months ended in August.

Later tonight sees the ECB rate decisions and Central Bank President Draghi speaking.  The European Central Bank looks set to announce a range of stimulus measures Thursday, with markets waiting anxiously for details of a plan that could include both lower interest rates and fresh bond purchases. The ECB’s current deposit rate is minus 0.4%.