Terms of Trade

Terms of Trade figures for Q3 were released on Friday and point to another hefty rise in the price of Australia’s exports. The pure price index measure reported that export prices in $AUD terms rose 7.8% for the quarter with mineral ores leading the way up 14.6%. Coal was also up 17.4% and gas (natural and manufactured) was 15.6% higher. For import prices, there was a small rise of 0.7%, with the appreciation of the $AUD helping to keep prices in check.

The G-20 Finance ministers meeting over the weekend had a key focus on currency devaluations as the US had put forward either specific currency or balance of payments targets. No detailed agreement could be reached, however Ministers did come to some agreement to see a move over time towards more market determined exchange rates. Only time will tell to see if this occurs.

Producer Price Index (PPI) for Q3 is released at 11.30am today, however the highlight of the day will be Glenn Stevens (RBA Governor) speaking to the AiG Annual National Forum in Canberra. The market will be looking for any clues going into the live meeting next Tuesday.

An important week ahead in the markets as the headline act on Wednesday (Q3 CPI) will weigh heavily on the Nov 2 rate decision. The Fed Chairman Bernanke is speaking tonight and the market will be looking for further comments into Quantitative Easing. GDP and Consumer confidence are also released this week in the US, and may provide some insight for overseas conditions, as the RBA is still concerned about Global growth. Traders are expecting a 40% chance of a rise in the cash rate next Tuesday.