Australia in recession, ADP & Barratt earnings

For the day ahead we've got Australia Q2 GDP data which is expected to show Australia in a technical recession, US ADP employment data- as well as earnings from Barratt Developments, CrowdStrike and Macy’s.

So the Aussie dollar just hit two-year highs at 0.74 to the dollar - and the interesting thing about that is that within 24 hours of it doing so we had the RBA meeting and there was no mention of currency strength - something they’ve been keen to do in the past. So arguably the RBA are giving carte blanche for traders to push the Aussie higher. Today GDP figures are expected to show Australia dropped into recession, which is obviously horrible for Australia - but the key thing here is to look at the relative depth of the recession, and its much shallower than elsewhere. Forecasts are for -6% - compare that with -20% in the UK.

Probably the biggest datapoint of day is US ADP because it sets us up for Friday’s non-farm payrolls. If I can take you on a quick walk down memory lane - remember last month that ADP saw a huge miss of 167k when consensus had been for 1.5 million- but NFP still topped expectations two days later. This month economists have turned a little more modest with predictions for 950,000 private American jobs created.

I’ll touch on Barratt - the British homebuilder’s earnings - which I think will be more interesting for its guidance on the second half than for what happened in the first half of 2020 when things were clearly bad. There is a housing boom going on in the UK right now thanks to a move to the suburbs because of the coronavirus, seemingly permanently low interest rates and an emergency cut to stamp duty to homes under £500,000. That should mean upbeat guidance from Barratt. FYI Barratt trades on 7 times earnings, which over the long haul feels low.

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