German industry disappoints
By Vincent-Frédéric Mivelaz
The German economy slowed in June. Though June’s trade balance is the highest since March 2018 amid exports and imports estimated at EUR 115.5 billion and EUR 93.7 billion (highest monthly import value since first publication in 1950), German production is easing. At -0.90% (consensus: -0.50%) monthly, June industrial production was lower, suggesting a global slowdown in manufacturing, despite strong numbers in May. We expect Q2 GDP (published on 14. August 2018) to be slightly above Q1, around 0.40%. Strong economic confidence, private consumption and inflation at 2% remain supportive for the Q2. EUR/USD is currently trading at 1.1586, expected to decline to 1.1555 in the short-term.
AUD better bid as rates stay put
By Arnaud Masset
The Australian dollar rose more than 0.60% on Tuesday morning after the Reserve Bank of Australia left the Official Cash Rate unchanged at its record low 1.50%. The bank’s tone hasn’t changed since July: it still expects the economy to expand by slightly more than 3% in 2018 and 2019; regarding inflation, the forecast is for higher than 2% in 2019 and 2020. Finally, the RBA welcomed the easing of the housing market as housing credit growth continued to decline, thanks to tighter lending standards. Labour participation continues to increase, while growth in employment remains positive.
In the FX market this morning, the Aussie’s appreciation is due to a broad US dollar weakness. The greenback lost ground against all its G10 peers, with the Dollar Index falling 0.16% to 95.20. AUD/USD climbed to 0.7434 and is about to test the 0.7441 resistance (high from 31 July). The currency pair is stuck in range trading for the last two months – just like most of G10 currencies. It looks like investors are waiting to get further clarity on the trade war between the US and its main trading partners. This could continue for months.