Risk aversion and trade uncertainty took chunks from Aussie’s gains last week. Can the comdoll recover with this week’s catalysts?
Here’s a short list of events you should watch out for:
Trade balance (Aug 6, 2:30 am GMT)
Australia’s trade surplus jumped to a new record high of 5.75B AUD in May as higher iron ore prices helped boost exports by 4.0%.
The Aussie gained pips at the report’s release, but it wasn’t until China’s services PMI was released when its intraday uptrend really gained momentum.
This week analysts see Australia’s trade surplus clocking in at 6.0B AUD for the month of June. Much weaker than expected numbers could escalate concerns over global trade conditions, y’all better stick around for the numbers.
One thing you should note is that the trade data will be published just hours before the central bank will release its August policy decision. Which brings us to the next event…
RBA’s policy statement (Aug 6, 5:30 am GMT)
As widely expected, the Reserve Bank of Australia (RBA) cut its interest rates for a second month in a row to a record low of 1.00% in July.
What traders didn’t expect was for Governor Lowe to signal a pause in rate changes “over the coming months” as they monitor “how things evolve” after their back-to-back rate cuts.
The Aussie spiked lower at the cut but soon recovered its losses when traders priced in the lack of further dovishness from the RBA instead.
This week market players expect the RBA to keep its interest rates steady at 1.00%. The central bank will likely continue worrying over weak inflation outlook and increased global trade tensions, though, so a third rate cut this year is still on the table.
Keep an eye out for hints that the RBA gang might pull the trigger at least one more time before the year ends!
China’s growth concerns
We know from last week’s price action that Aussie traders tend to show their concerns over China’s economy by hitting the “sell” button on the Aussie.
This week we have not one, but at least THREE notable releases from the world’s second largest economy.
The first and more closely watched is the trade balance data scheduled on August 8 during the Asian session. Th report is expected to reflect a 0.2% dip in exports AND an 8.8% drop in imports amidst trade tensions between the U.S. and China.
Meanwhile, the CPI and PPI numbers will be printed on Friday at around 2:30 am GMT. Prices are expected to maintain last month’s growth rates, though, so unless we see significant hits or misses, the reports will likely have limited impact on the Aussie’s price action.
Oh, and don’t forget that the POTUS slapped fresh tariffs on $300B worth of China’s products! Remember that the move took markets by surprise and dragged on higher-yielding currencies last week.
Can U.S. and Chinese trade reps come to some form of agreement this week? Or will China announce retaliation and escalate global trade concerns over the next couple of days?
Missed last week’s price action? Read AUD’s price recap for July 29 – August 2!