Fundamental Analysis

Weekly Roundup Report 23/06/2017

• July 18, 2017

EVENT RECAP: WEEK ENDING 23^rd JUNE 2017

North America Inflation in Canada fell back to 1.3% year-on-year growth in May. Before the data was released, the Bank of Canada was poised to raise interest rates, on the basis that economic growth is surpassing many of the world’s major economies. However, with a slowdown in price growth, brought about partly by falling commodities prices, a rate hike in July seems less likely. Consumer spending appears to be healthy, with growth of 1.5% for May compared with a contraction 0.1% in April. Most subsectors of the retail trade sector saw rises with largest growing sector in home appliances and hardware.   Asia Pacific In Australia, RBA Governor Phillip Lowe indicated in a speech at Canberra last Monday that incomes over the next “quarter of a century would be lower than the past quarter of a century.” The governor raised concerns about the Australian economy falling behind as the process of structural reform was hampered by “the political process.” The monetary policy committee elected to keep current policies unchanged at the Board meeting on Tuesday with the Cash Rate remaining at 1.5%. However, the committee highlighted the slowdown in consumption for the three month ending March, brought about by lower retail sales. In New Zealand, the monetary policy stance was left unchanged, with the Official Cash Rate remaining at 1.75%. Both economic growth and inflation were lower in the first quarter; however, the bank stated that the outlook for GDP remains positive indicating merit in maintaining current accommodative monetary policy.   United Kingdom The Bank of England’s Governor Mark Carney argued against the raising of interest rates at this point given the upcoming Brexit negotiations. Three committee members voted to raise interest rates from 0.25% as a result of rising inflation, with one member highlighting the cost of waiting to dampen inflationary pressure.   Europe In a statement following the Swiss National Bank’s policy review on Tuesday, Chairman Jordan indicated the bank was open to further interest rates cuts. There was also suggestion of a readiness to implement exchange rate targeting to dampen an overvalued Swiss Franc. At the present time however, negative rates remain unchanged.