Greece Decision Delayed to November, UK Construction PMI Due
Greece decision delayed until November, UK construction PMI expected to slip back, RBA holds rates and shifts to a dovish outlook driving down Aussie below 0.95, Euro zone PPI expected to fall, Bernanke to testify to JEC
A decision on the next tranche of aid for Greece has been put back until early November after Greek officials told EU finance ministers they didnt need the money until then. The troika report has also been delayed until after the 13th October and as such the Eurogroup meeting scheduled for that weekend has been cancelled. Eurogroup leader Junckers assured the markets that Greece would continue to be supported by EU leaders and no one had suggested that Greece restructure its debt burden. Junckers did hint, however that the issue of a revision of the current 21% private sector involvement, or debt exchange, could well be under review.
UK growth concerns could remain in focus this morning after yesterdays surprise rebound in September manufacturing PMI from 49.4 to 51.1, back into expansion territory for the first time in 3 months.
Todays release of construction PMI is not expected to be as positive, but it is still expected to remain in positive territory, though sliding back from 52.6 in August to 51.6 in September.
If todays PMI doesnt deteriorate significantly and tomorrows services number is similarly positive, the expectation is such that the Bank of England could well maintain its current wait and see approach at this weeks rate setting meeting, given that it may need to act if the situation in Europe continues to deteriorate. At the same time as this data is released MPC member David Miles is due to speak in Oxford, and given his recent comments that the case for QE has become finely balanced markets will be looking for any clues with respect to a change in tone in light of this weeks economic data.
As expected the Reserve Bank of Australia left interest rates unchanged at 4.75% in the wake of global uncertainty and concerns about the sovereign debt situation in Europe. in a shift from previous meetings the bank admitted that the inflation outlook had shifted and that the bank could well move interest rates lower if the need arose. In other data released earlier Australia's trade surplus increased in August to A$3.1bn from A$1.8bn in July.
Last nights decision by the US senate to push through a bill aimed at imposing tariffs on Chinese goods due to its fixed exchange rate policy, could also affect the Australian dollar if it gets ratified in the coming weeks. China has warned of a response if the bill passes, warning that it could weaken attempts to promote global economic recovery.
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Pricing pressures in Europe have eased somewhat in recent weeks and todays release of Euro zone PPI data for August is no exception with month on month prices expected to fall 0.2%, and pulling the year in year rate down to 5.8%.
Later this afternoon Fed Chairman Ben Bernanke is expected to testify to the Joint Economic Committee.
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