Australian Economy – The current rise in the AUD seems to be putting the brakes on the recent jump in Australia's trade surplus, with exports down about 1%1. On the employment front, June saw both a rise in employment and the participation rate, which equated to a jump of 0.5% in the total monthly hours worked by Australians.
Global Economy – Despite the confusion, distraction and conflict oozing out of Washington DC, the US economy is pushing along well. Initial GDP figures released in July showed steady growth of 2.8% for the year ending 30 June and the unemployment rate continues to hover near record lows2. Across the pacific, the Chinese economy seems to also be heading in the right direction, with annual GDP growth beating expectations at 6.9%, which was also above the official target of 6.5%.
Investment Markets – Australian equities started the month where they began, but the rest of the major markets were somewhat mixed. Europe was flat as well, however, Japanese stocks gave up about 0.5% of returns whilst the US and China were both up about 2%. Hong Kong fared best, jumping over 6%3.
Outlook – The rise of the Australian dollar back to 2.5 year highs is causing concern for both domestic investors and the RBA. Australian equities are likely to be under pressure should the currency continue to strengthen, due to lower overseas income translations and a slowing of foreign investment. The RBA would be very hesitant to raise interest rates in such an environment and will look to influence the currency with the tools at their disposal.
S&P/ASX 200 – 12 months to 31 July 2017
Source: Core Equity Services
Footnotes: 1. Australian Bureau of Statistics; 2. US Dept of Labor; 3. Bloomberg data.