US GDP growth beats expectations. Tonight’s US inflation data could take the Fed within touching distance of 2% inflation. The Nikkei falls the most in eight years. South Korea’s GDP contracts, making an early rate cut more possible.
In our bonus deep dive interview ANZ Economist Bansi Madhavani outlines why a September rate cut by the Bank of England is looking more likely than an earlier move in August.
5 things to know:
Overnight data showed US GDP grew at an annualised rate of 2.8% in the June quarter, which was higher than market expectations for around 2% and up from 1.4% in Q1. Bansi said it reinforced expectations the Fed can cut in September.
In markets overnight: The S&P 500 was down 0.5% and the Dow was up 0.2% at 6 am Sydney/Melbourne time, while the US 10 year yield fell 3 basis points and the 2 year rose 2 basis points. The biggest mover overnight was the Nikkei, which fell 3.3%, its biggest one-day fall in eight years. That risk-off tone dragged the Aussie and Kiwi dollars down around 0.6% to 65.40 USc and 58.88 USc.
Bansi says the focus now turns to US PCE inflation data tonight.South Korea’s Q2 GDP was weaker than expected, falling 0.2% in the quarter. ANZ Economist Krystal Tan says it could bring forward monetary policy easing.
The Monetary Authority of Singapore releases its July Monetary Policy Statement today. ANZ’s Head of Asia Research Khoon Goh isn’t expecting any change to its monetary policy stance.
With the Paris Olympics starting, ANZ Head of FX Research Mahjabeen Zaman says French economic activity is bouncing after election-related turmoil.
Cheers
Bernard
PS: Catch you next week with all the detail and analysis of tonight’s US PCE data.
