The US-China trade war continues to remain the focal point of global markets, with the latest talks between the two economic powerhouses failing to progress as another $16 billion of like-for-like tariffs were imposed during August. At this stage, it is becoming increasingly likely that tensions will continue to worsen, with the majority of the impact on economic growth occurring in 2019. In other news, the Federal Open Market Committee (FOMC) agreed to maintain the target range for the federal funds rate at 1.75-2.00% following their August meeting.
Domestically, the revolving door of Federal Parliament continued as Scott Morrison or ‘ScoMo’ replaced Malcom Turnbull as head of Australia’s Liberal Party and the country’s 30th Prime Minister. The RBA unsurprisingly left the overnight cash rate stable at 1.50%, as the central bank cited subdued inflation and low wage growth as the primary drivers behind this stance.
Figure 1. Term Deposit Spread Over Relevant BBSW: August 2018 v July 2018
Source: RBA, BondAdviser
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