The Aussie barely reacted to Australia’s top-tier reports last week. Does this mean that risk sentiment will once again rule its charts this week? Here are potential catalysts.
RBA’s quarterly bulletin (March 15, 12:30 am GMT)
Unlike last week, Australia will take a chill pill this week in terms of printing top-tier reports. If you’d like to day trade, though, then you might want to watch out for the Reserve Bank of Australia’s (RBA) quarterly bulletin.
In it we’ll see the central bank’s thoughts and numbers related to the economy. Take note that the RBA has also recently published its monetary policy statement, so the impact will most likely be minimal.
Still, keep an eye out for any tidbits that might shed light on the RBA’s policy direction!
Overall risk sentiment
Much like the Kiwi, the Aussie mostly took directional cues from risk appetite during the previous week.
This week the headlines you need to keep an eye on are ones that are related to Trump’s tariff plans and how the other major economies respond to it, as well as updates on the people around Trump and whether or not we’ll see more resignations this week.
Any instability is bad for risk appetite, so make sure you’re glued to the tube if or when risk sentiment-related headlines pop up!
Last Week’s Price Review
After six consecutive weeks of being a net loser, the Aussie finally found itself on the winning since since it’s currently on track to closing out the week as the second-strongest currency (as of 7:00 am GMT).
The overlay of AUD pairs looks kinda messy, but it does get better if we simply remove AUD/CAD from the overlay.
As you can see, the Aussie didn’t track gold prices that closely. In fact, the Aussie even began to decouple from gold prices during Tuesday’s late U.S./Wednesday’s early Asian session.
But backtracking for a bit, the Aussie strength on Monday and Tuesday was due to the new narrative that fears of a trade war were easing because of pushback from U.S. politicians and U.S. businesses against Trump’s tariff plans. This allowed both commodities and overall risk sentiment to recovery, which benefited the higher-yielding Aussie.
The RBA gave its monetary policy statement on Tuesday, but as noted in Tuesday’s Asian session recap, there wasn’t really anything new, so the Aussie took directional cues from dipping gold prices, as well as Australia’s disappointingly wider current account deficit and retail sales report miss.
The Aussie later spurted higher on most pairs (except other comdolls) during Tuesday’s London session. And as noted in Tuesday’s London session recap, this was due to news that North Korea is open to denuclearization talks, which fueled even more risk-taking and caused commodities to rally hard as well.
Unfortunately for the Aussie, it got hit hard by a wave of sellers later on when word got out that Trump’s economic adviser, Gary Cohn, has resigned, which apparently reignited fears of a potential trade war since the Cohn is supposedly seen as a force for global free trade and his resignation therefore pushes the pendulum towards protectionism.
Australia’s Q4 GDP report also disappointed, but that didn’t really push the Aussie any lower.
In fact, the Aussie began tilting higher after the GDP report was released. It’s not clear why, however, since only the 1.0% quarter-on-quarter increase in household spending (+0.5% previous) is the only really positive thing about the GDP report. Everything else pretty much disappointment, with business investment and exports down. It’s possible, however, that longer-term traders were pleased with strength in consumer spending.
Anyhow, the Aussie’s rise was later sustained by returning appetite for risk, which market analysts attributed to (once again) easing fears of a possible trade war, which gained traction when rumors began to spread that Trump will exempt some countries from the planned tariffs.
After that, the Aussie appeared to be taking directional cues from gold prices again before having a more mixed performance starting from Thursday’s U.S. session.