Looks like the Aussie mostly took cues from risk sentiment and top-tier reports from other major economies last week. Will it have a chance to dance to its own tune this week?
RBA’s meeting minutes (Feb. 20, 12:30 am GMT)
On Tuesday the Reserve Bank of Australia (RBA) will publish its February monetary policy meeting minutes.
If you recall, the central bank’s worries over household spending and weak inflation had spooked rate hike junkies into selling the Aussie two weeks ago. Will the meeting minutes provide details on factors that the members are looking at?
Australia is in for a light week data-wise with Chinese markets out on a week-long holiday and the Land Down Under only scheduled to print lower-tier reports.
The MI leading index will be published on Tuesday at 11:30 pm GMT, followed by construction work and wage price details for Q4 2017. The last bit will come out on Wednesday at 3:30 pm GMT when we’ll see the CB leading index numbers.
As detailed below, the Aussie’s price action was affected by overall risk and dollar sentiment. With not a lot of potential catalysts from Australia, it’s likely that we’ll see the Aussie take its cues from gold and risk sentiment again. Keep close tabs on other major catalysts, will you?
Last Week’s Price Review
The Aussie’s losing streak is apparently not over yet since the Aussie is the third worst-performing currency of the week as of 7:00 am GMT.
A quick glance at the overlay of AUD pairs and gold prices (black line) shows that the Aussie didn’t track gold prices very closely this past week, particularly on Tuesday and Thursday, although Wednesday also counts.
The Aussie’s broad-based dip on Tuesday despite the rise in gold prices was likely due to the returning risk-off vibes at the time. This is supported by the fact that the Aussie’s slide stopped when risk appetite got revived during Tuesday’s U.S. session.
Other possible causes for the Aussie’s Tuesday slide were the rumors that were floating around at the time that Trump is supposedly deciding on whether or not to slap “imports and/or quotas” on steel and aluminum imports, which is bad news for Australia since iron ore is a chief raw material for steel and iron ore, in turn, is Australia’s main commodity export.
Moving on, the Aussie appeared to be tracking gold prices again on Wednesday. However, the Aussie encountered heavy selling pressure when U.S. CPI came in better-than-expected, likely because of interest rate differentials and monetary policy divergence since the RBA is not expected to hike rates anytime soon while the CPI report reinforced expectations for another Fed rate hike.
Fortunately for the Aussie, the CPI report didn’t really attract follow-through demand for the Greenback, allowing gold prices to shoot up, dragging the Aussie along for the ride.
Although it’s also possible that traders were taking cues from the risk-on vibes after the U.S. CPI report was released. It’s also possible that some traders were opening preemptive positions and/or covering their Aussie shorts ahead of Australia’s jobs report.
Speaking of Australia’s jobs report, that caused the Aussie to toss and turn for a bit.
Sure, the 16K increase in employment was more than the consensus for a 15K increase. However, jobs growth was fueled by the increase in part-time jobs. Moreover, 49.8K full-time jobs actually got culled and hours worked eased for the second month straight, which are rather disappointing.
In short, Australia’s jobs report was mixed, which is why the Aussie didn’t really go anywhere for awhile after the report was released.
However, it soon became clear that the Aussie was getting hit by another wave of sellers when Thursday’s morning London session rolled around, which made sense since gold prices were sliding at the time.
However, gold prices steadied during Thursday’s afternoon London/early U.S. session but the Aussie continued to take hits across the board until around 3 pm GMT.
The likely reason for this is that the Aussie was taking directional cues from risk sentiment again, since the major European equity indices came off their highs at the time, hinting that risk aversion was making a comeback.
Risk appetite returned later and gold prices even began to tilt to the upside. And so the Aussie also began to find support and tilt to the upside as well.
The damage wreaked by the Aussie’s broad-based slide on Tuesday and Thursday was already done, however.