Australia: US manufacturing data, moves by the German government to boost the European Financial Stability Facility (EFSF) and hopes of new measures by US policymakers all provided the necessary backdrop to improve risk appetite overnight, which boosted the AUD.

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This makes it four consecutive days of gains in the AUD but it is showing some signs of fatigue. There is key economic data due out on this morning, including the performance of manufacturing (PMI) index for August and July retail sales. This data will be watched as closely as ever, given the rally in the AUD, and it possibly follows the gains may not be sustainable if the data is weak. In many respects the contrast, that is the Australian economy, may be confirmed further. Retail sales are highlighting the slow economy whilst the manufacturing PMI will most likely highlight the healthy economy.

Retail will be particularly scrutinised, with another slow month expected. The other data will provide a view to the outlook for 2012 and is probably the one the RBA will spend more time analysing. This Q2 release, which translates to next week's Q2 GDP, needs to be studied for business investment expectations, as this is the third estimate of investment spending intentions for 2011-12. The second estimate was A$140bn which was regarded as a sign of healthy growth in business investment next year. The surprise to look out for would be any downward revision to investment expectations today.

Majors: The EUR continues to be weighed down by sovereign debt and bank risk, despite Germany’s cabinet approving the draft legislation to widen the scope and funding size of the EFSF. Portugal announced another austerity package aiming to be in balance by 2015 against a recessionary backdrop. Unemployment remains very high in Spain and the Netherlands. Canada’s economy contracted in Q2 while in the US, the last of the regional PMI’s held up relatively well. Today sees China’s official PMI data for August released at 11am AEST and there is a raft of data out of Europe and the US.

Economic Calendar
AU Retail Sales JUL
AU Private Capital Expenditure Q2
CH PMI Manufacturing AUG