A pretty busy week for Australia, which will see top-tier data such as retail sales, trade balance, AND RBA’s policy decision.
Here’s what you can expect from the events:
Retail sales and trade balance (May 7, 2:30 am GMT)
Retail purchases gained by 0.8% in February, which not only beat analysts’ expectations of a 0.2% increase, but also marked the fastest pace since November 2017.
Meanwhile, Australia saw a 4.8B AUD trade surplus in the same month. That’s the largest trade surplus on record, yo!
A closer look told us that exports hit an all-time high of 39.83B AUD after gaining by another 0.2% from January, while imports shrank by a whopping 1.0% to 35.04B AUD
The back-to-back upside surprises energized the bulls enough to push the Aussie higher and keep it near its weekly highs until the end of the week.
This week analysts see retail activity at around 0.2%, much weaker than the 0.8% seen in February. Weaker numbers are also expected of the trade balance data, which could only show a 4.4B AUD surplus against February’s 4.8B AUD reading.
We already know from last month’s release that the Aussie’s reaction is directly correlated to upside surprises from the reports. If the reports come in much weaker than analysts had expected, then we might see the Aussie lose ground against its counterparts.
Then again, we might not see explosive reaction, at least not until the RBA’s event is over. Which brings us to our next catalyst:
RBA’s rate statement (May 7, 5:30 am GMT)
Just a few hours after the retail and trade data we’ll see what the Reserve Bank of Australia (RBA) has to say about the economy.
In last month’s statement the central bank surprised markets with hints that it’s jumping on the dovish bandwagon.
It shared that it will “set monetary policy to support sustainable growth,” a tiny bit different from its March statement where it said that its unchanged policies are “consistent with sustainable growth.”
This, along with weak inflation reports, are why traders are expecting a live meeting this week where Governor Lowe and his team could cut rates by 25 basis points for the first time since August 2016.
Before you price in a rate cut, however, you should also know that some analysts also think the central bank could take postpone an actual rate cut and publish a more dovish statement instead.
Mixed expectations tend to see volatile price reactions, so make sure you stick around for any tradeable intraday trends during the event!
China’s trade data (May 8, Asian session)
Australia’s exports depend a lot on China’s demand, so the Aussie tends to react the most to China’s data releases.
This week market geeks expect the world’s second largest economy’s trade surplus to come in at around the $32.64B figure seen in March. See, exports could slow down from 14.2% to 3.0% while imports could see a 2.0% drop on top of last month’s 7.6% decline.
Data releases could take a backseat to the U.S.-China trade negotiations, however.
This Sunday afternoon Trump re-escalated trade tensions between the world’s largest economies by threatening to increase tariffs on $200B worth of Chinese goods from 10% to 25% by this Friday and for an additional $325B worth of goods to get fresh tariffs “shortly.”
….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!
— Donald J. Trump (@realDonaldTrump) May 5, 2019
Depending on how the Chinese negotiators react, we could see uncertainty dominate the markets and drag high-yielding currencies like the Aussie down the charts.
Keep close tabs on relevant updates, will ya?
Missed last week’s price action? Read AUD’s price recap for April 29 – May 3!