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Data and metals help confidence

Positive economic data, assisted by an overnight rally in metals and oil should support a firm tone for this morning’s market open

It’s been a good 24 hours for economy watchers with solid reads on data ranging from China’s manufacturing PMI to Australia’s capex plus personal spending and wage growth in the US. Yesterday’s capital expenditure data joined Wednesday’s construction work report to provide a boost to prospects for Australia’s June quarter GDP growth.

While recent data on the US and Chinese economies indicates continued growth, traders will now be seeing this through the prism of two upcoming events.  These are the impact of Hurricane Harvey on the US economy over coming months and what the National People’s Congress might mean for future economic policy in China.

The US Dollar weakened last night on the back of stubbornly low core inflation data. While income data shows a pickup in wage growth in recent months, this is yet to flow through into the core PCE deflator which continues to languish at 1.4% on a year on year basis.

A combination of US Dollar softness and trader focus on the risk that politicians will play chicken with the US debt ceiling produced a rally in gold. From here a break above this week’s high around $1326 would indicate ongoing bullish sentiment for gold.

The Aussie Dollar has also rallied, benefitting from the twin drivers of a softer $US and stronger metals prices. 

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