A review of the week past and the week ahead 2018 August 14th

What mattered last week:

• Temporary easing of U.S.-China trade tension fears as Chinese foreign exchange reserves as well as Chinese exports and imports were better than expected in July.
• Donald Trump announced the doubling of metal tariffs against Turkey. The latest instalment in the ongoing dispute between Turkey and the U.S. over the imprisonment of an American Pastor. 
• In response, the Turkish lira fell by almost 20 per cent on Friday building on earlier losses for most of 2018, fuelled by concerns over economic mismanagement as well as intervention from President Erdogan on central bank policy decisions.
• The EURUSD fell below the key 1.1500 support region, on reports that ECB officials are concerned about European Banks exposure to Turkey.
• The U.S. imposed further restrictions on Russia in response to the chemical nerve-agent attack in the UK, which prompted a 5.5% rally in USD/RUB.
• The RBNZ delivered a dovish surprise to the markets by pushing back the start of rate hikes from Q3 2019 to Q3 2020, citing weaker growth and declining business confidence.
• A reliable dove in recent years, Federal Reserve Bank President Charles Evans made hawkish comments stating that the U.S. economy is performing “very well” and with inflation now back above 2%, raising interest rates to “somewhat restrictive” levels is appropriate.

For the week ahead, the key events are:

Australia: NAB business confidence (Tuesday), Westpac consumer confidence and wage price index (Wednesday). Then follows labour market data (Thursday). The unemployment rate is expected to remain at 5.4% aided by a 15,000 rise in jobs. We also have Reserve Bank of Australia Governor Phillip Lowe before the House of Representatives Standing Committee on Economics (Friday).

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