Domestic and global markets remained in turmoil this week as tensions continued to escalate in the Middle East. Ongoing upward pressure on oil prices exacerbated the volatility in financial markets, which are jittery about the impact that the conflict could have on the outlook for global demand, and the campaign across the developed world to tame inflation.
This week’s news has been dominated by the conflict and humanitarian crisis in Israel and the Gaza strip. Related to this, there was considerable concern about the impact a crisis-related surge in oil prices will have on inflation across the world.
In Australian market news this week, the ASX200 broke back up through the 7000 threshold on Tuesday. This was said to have been off the back of ‘dovish’ sentiments on US monetary policy (with markets pricing a lower likelihood of another official rate rise) and positive signs of inflation easing in NAB’s monthly business survey.
At its meeting yesterday, the Reserve Bank of Australia’s Board decided to leave the official policy rate unchanged at 4.10 per cent, for the fourth month in a row. The statement by the new Governor, Michele Bullock, was taken by commentators as ‘flagging’ that there will likely be at least one more interest rate rise before the RBA is comfortable that inflation is under control and returning to the 2-3 per cent target in a timely way.
As at the close on 26 September, the AUD/USD was little changed over this week, down 0.26 per cent, to 0.6414. The AUD/RMB also fell only slightly, down 0.09 per cent in the period, closing at 4.6886 on Tuesday.
New data show that the unemployment rate in Australia remained steady at 3.7 per cent in August. This was despite the fact that the number of people employed rose 65,000, more than double what was expected. The participation rate hit a record level of 67 per cent.
The corporate earnings season in Australia has now concluded, and official interest rates were kept on hold for the third month in a row last week. This has meant a relatively quiet week in economic and market news.
In Australian economic news, the Federal Government released its latest periodic Intergenerational Report. This document and forecasts looks at long term trends in the economy.