Looks like we’ve got a pretty big week ahead for the Aussie! Which catalysts could influence the comdoll’s price action? I’ve got a list!
RBA’s policy statement (Mar 6, 3:30 am GMT)
A brand new month means another chance for central banks like the Reserve Bank of Australia (RBA) to share their two cents!
While market players aren’t expecting Governor Lowe and his team to make changes to the 1.50% interest rate, they will pay close attention to the central bank’s concerns over low wages and inflation.
If you’ve been out of touch for a while, you should know that some speculators are pricing in a rate hike as early as the first half of 2018. If the RBA repeats its concerns, then we might see the Aussie lose some support.
Take note, however, that Governor Lowe is also set to make a speech at 9:35 pm GMT on the same day.
In his speech last month, he tempered the RBA’s cautiousness by sharing that (a) the RBA is more likely to raise rates rather than cut it in its next moves but that (b) they don’t see a strong case for a near-term adjustment to their policies.
Quarterly GDP report (Mar 7, 12:30 am GMT)
In the Q3 3017 GDP release we found out that growth in non-dwelling construction and inventories was not enough to offset the hits from weaker domestic demand and trading activities.
And if last week’s reaction to the weaker-than-expected CAPEX report is any indication, then investors might be concerned that we’ll see another slowdown in growth in Q4.
Analysts are expecting a 0.5% after slowing down from 0.9% to 0.6% in Q3 2017, so y’all better watch yo Aussie trades if we see another downside surprise!
Current account and retail sales reports
The current account (-12.3B AUD expected vs. -9.1B AUD previous) and retail sales (0.4% expected vs. -0.5% previous) are both scheduled at 12:30 am GMT on Tuesday, but it’s unlikely that we’ll see sustained moves since the releases are three hours away from the RBA’s own event.
Trade balance report (Mar 8, 12:30 am GMT)
In the Q3 2017 GDP report we saw that unfavorable trading conditions is one of the drags in the economy.
The January trade balance numbers won’t be printed until after the Q4 2017 GDP report, so this week’s release could either confirm or challenge whatever trading trends we see on the GDP update.
If it prints a 0.22B AUD surplus as analysts are expecting, then we could see a bit of relief for the high-yielding comdoll. But if Australia started the year with a trade deficit, then we could see deeper losses for the Aussie.
Global trade war rhetoric
As a big exporter of iron ore and other commodities, Australia has a lot to lose if other countries follow the Donald’s footsteps and start slapping on higher tariffs on commodities.
Keep an eye out for China’s reaction to Trump’s policies and see how they affect commodity prices all around, will ya?
Last Week’s Price Review
The Aussie is the third-worst performing currency of the week, as of 7:00 am GMT. This means that the Aussie is about to mark the sixth consecutive week of broad-based weakness.
Gold is lower for the weak due largely to a firmer Greenback, market analysts say. And as usual, Aussie pairs were taking directional cues from the slide in gold prices.
And while gold did slide on Wednesday and early Thursday, it’s rather interesting that the Aussie’s slide was noticeably much sharper.
Some market analysts attributed the Aussie’s Wednesday slump on China’s disappointing PMI reports.
As marked on the overlay of AUD pairs, however, the PMI reports were released during the Asian session while the Aussie’s broad-based slump started during the U.S. session. Moreover, the Aussie even started climbing higher after the PMI reports were released, likely because gold was in recovery mode at the time.
One possible reason for the Aussie’s Wednesday weakness (other than gold) is the intense risk-off vibes at the time.
However, it’s also possible that the Aussie was hit by monetary policy divergence between the RBA and the Fed, as well as interest rate differentials, given that the stock market selloff was being blamed by market analysts largely on higher expectations of faster Fed rate hikes, thanks to New Fed Chair Powell’s hawkish testimony on Tuesday.
Moving on, the Aussie’s sharp drop on Thursday is easier to explain since the Aussie slumped after Australia’s quarterly private capital expenditure report showed a 0.2% decrease in Q4 2017, which is a swing and a miss from the +1.0% consensus.
Other than that, the Aussie may have also taken some hits because of rumors at the time that Trump wants to slap tariffs on aluminum and steel imports. Of course, we now know that these rumors were based on reality since Trump did announce plans to impose a 25% tariff on steel and 10% on aluminum.
Anyhow, the RBA statement is coming up next week, so it would be interesting to see if the RBA has anything to say about these planned tariffs and if the RBA will still repeat its tune of not budging monetary policy for a while.