NAB Morning Call

Tuesday 28th July 2020

Gold has reached a record high, whilst the US dollar continues to slide. NAB’s Ray Attrill says it partially reflects the expectation that the Fed will reinforce its commitment to not raise interest rates until inflation is back up over 2 percent, which will be year away. The weaker US dollar has seen the Euro reach US$1.178, the highest its been since 2018 (on a trade weighted basis, the highest since 2014). Phil Dobbie asks whether this suggests a long overdue correction in the relationship between the Dollar and the Euro. Locally, weekly job numbers will be important, although they predate the full force of the lockdown in Victoria.

Monday 27th July 2020

The US dollar lost a lot of ground last week as Congress argued over the shape and form of the next recovery package. NAB’s Rodrigo Catril says hopefully there will be some agreement on the continuation of the supplementary unemployment benefit. But that’s not the only influence on the weaker mighty dollar – tensions are ratcheting up with China, with an arrest of a researcher allegedly acting on behalf of the Chinese military, and COVID-19 cases continue to rise. The Aussie dollar could lose some of its shine on COVID news too, with the number of cases in Victoria continuing to rise over the weekend.

Friday 24th July 2020

It’s been a classic risk-off session so far, with the US and Aussie dollar losing ground, more interest in the Yen, US shares and oil prices plunging, with government bonds and precious metals in demand. Phil Dobbie asks NAB’s Gavin Friend whether it’s because, as well as some negative news, like a rise in new US unemployment claims, there’s also an absence of anything to positive for investors to cling hope on to? The exception being the lingering optimism surrounding the European recovery plan and the fact that COVID-19 is now relatively well contained in Europe. They also discuss Josh Frydenberg’s mini budget yesterday and Brexit hopes, which, on the face of it, aren’t going well, but how much of that is good old fashioned negotiating tactics.

Thursday 23rd July 2020

Europe’s done it, Australia’s done it. Now it’s the US’s turn to extend their fiscal support, and the deadline is looming. NAB’s David de Garis talks about the likely direction of the US fiscal package, with the President likely to want to spend more as infection rates rise and his support falls. He also talks about the significance of the deal in Europe – could this be the start of a new direction for the EU? Meanwhile, Josh Frydenberg presents the budget numbers for Australia today, Victoria presents their own budget and, tonight, the weekly jobless numbers for the US.

Wednesday 22nd July 2020

The Aussie dollar rose over 1.7 percent in this session. It's been helped by the gain in the Euro, after leaders there reached an agreement on a Europea Rescue Plan, less than two days after their weekend summit ended without a resolution. On today's podcast Phil Dobbie asks NAB's Ray Attrill whether this is Europe's time in the sun, with a rescue plan sorted and the virus contained across the continent. In the US the race is on to extend stimulus measures before Congress breaks for summer, and virus numbers continue to rise. Meanwhile, will the extension of support measures see further rises in equities and in the value of the Aussie dollar?

Tuesday 21st July 2020

Scott Morrison Scott Morrison will unveil changes to the JobKeeper and JobSeeker programs today – although Josh Frydenberg has already spilled the beans in today’s AFR. NAB’s Rodrigo goes through the changes with Phil Dobbie, as well as discussing the latest ‘hopes’ in the vaccine race. Just how to protect jobs is a challenge for policy makers the world over. How do you keep unemployment down, whilst encouraging labour mobility? Philip Lowe’s talk today should be interesting from that perspective. Markets seem less fussed about Britain’s stance over China today, or the restart of Brexit talks.

Monday 20th July 2020

After three days arguing over the size and shape of their European Recovery Plan, EU leaders failed to reach an agreement. Phil Dobbie asks NAB’s Tapas Strickland what it’ll mean for the Euro and European bonds. COVID-19 infection numbers continue to rise – could the Michigan consumer sentiment read on Friday mark a shift in direction, as more lockdowns seem likely? Closer to home New Zealand’s PMI reading was positive – how different is the story for Australia now? There will be a lot of interest in a lunchtime address by the RBA’s Philip Lowe tomorrow and the government’s budget update on Thursday.

Friday 17th July 2020

There have been a lot of employment numbers out over the last 24 hours – for the US, the UK and Australia. NAB’s Gavin Friend reiterates that government job support programs muddy the waters, but looking at hours worked shows that Australia is better positioned than the UK. China has shown a strong recovery in GDP, but retail sales are the Achilles heel. Meanwhile, all eyes will be on the EU leaders meeting over the weekend. The ECB’s Christine Lagarde gave the strongest hint yet that an agreement will be reached sometime, with grants and loans. That could be a game changer for the Euro.

Thursday 16th July 2020

Just how long will the impact of COVID-19 drag on for. Shares are up today on more hopes that a vaccine will be found soon, but NAB’s David de Garis points to comments from the US Fed’s Patrick Harker who suggests we all need to adapt to the new abnormal. The Bank of Canada released its Monetary Policy report for July, charting the recovery, with growth easing after the reopening phase, during a period of recuperation. As discussed in today’s podcast, that’s when reality starts to set in, as government support measures are eased. That’s why you need to specifically look at ‘hours worked’ in today’s jobs numbers in Australia, rather than total employment numbers. There’s another possibly shape – the W recovery. The UK’s Sir Patrick Vallance released a report today suggesting a second wave in winter could be worse than the first.

Wednesday 15th July 2020

The US dollar fell again today, driven by a rise in the Euro. NAB’s Tapas Strickland says the Euro’s rise is based on hopes that European leaders will reach a consensus on their rescue package this week. The Aussie dollar remains resilient, even as jobs growth stalled and there are fears that Victoria will enter a stage four lockdown. In the US banks are preparing for loan defaults, whilst the Fed’s Lael Brainard has said the central bank will “run the economy hot” until recovery is well underway, whilst warning of a second wave. Meanwhile, as the UK pulls Huawei out of its 5G networks, China is showing signs of conforming to the phase one trade deal. Perhaps they want to show they have complied in the hope that someone else will be in the White House next year.