Looks like the Aussie took heavy hits from shakeups in Trump’s administration last week! Will this week’s set of reports push it higher?
RBA’s meeting minutes (March 20, 12:30 am GMT)
In its March statement the Reserve Bank of Australia (RBA) shared its concerns over the rate of wage growth amidst increasing debt levels.
Still, Lowe and his team didn’t really share anything new, so market players ended up pricing the other top-tier reports that were released around time the RBA’s statement was printed.
Unless the RBA shares significant changes that would heighten their concern for the economy, or if there are no other catalysts to move the markets around, then we’ll likely see muted reaction from the Aussie.
Labour market numbers (March 22, 12:30 am GMT)
It was all good in the employment hood last January, as Australia saw a net of 16,000 workers find jobs. In fact, the numbers were so strong that the unemployment rate slipped from 5.6% to 5.5%! The catch was that the part-time jobs overshadowed gains in full-time employment.
This week market players are expecting to see a net increase of 20,300 new jobs created, while the unemployment rate is expected to remain at 5.5%.
Remember that the RBA is betting on continued improvement in the labour market to eventually stimulate consumer spending and the economy, so pay attention to details of the report and see if full-time jobs get some serious lift over part-time employment!
More drama in the White House?
We know from details below that recent changes in the Trump administration hasn’t really been a boon for the Aussie.
Will the Donald shake up his team once more? Word around the hood is that National Security Adviser HR McMaster will get the boot next, so keep your eyes glued to the tube in case we see more market-moving drama!
Last Week’s Price Review
The Aussie was last week’s champ, ending a six-week losing streak. However, the Aussie had a tough time this week and it’s even currently on course to finishing as the second worst-performing currency of the week after the Loonie (as of 6:00 am GMT), which may be a sign that the Aussie’s losing streak may be resuming.
A quick glance at the overlay of AUD pairs shows that the Aussie didn’t really track gold price that much, at least during the first half of the week. So, what was driving the Aussie’s price action?
Well, let’s first strip gold and AUD/CAD from the overlay to get this:
As you can see above, the Aussie’s price action was mostly steady before sliding broadly lower during Tuesday’s U.S. session, recovering during Wednesday’s Asian and London sessions, and then sliding again when Wednesday’s U.S. session rolled around.
The Aussie’s Tuesday slump was apparently in response to Trump’s firing of Secretary of State Rex Tillerson (via tweet no less).
Mike Pompeo, Director of the CIA, will become our new Secretary of State. He will do a fantastic job! Thank you to Rex Tillerson for his service! Gina Haspel will become the new Director of the CIA, and the first woman so chosen. Congratulations to all!
— Donald J. Trump (@realDonaldTrump) March 13, 2018
This caused risk aversion to flare up, which likely weighed on the higher yielding Aussie. The Aussie also got a final bearish kick when Politico released a report that claimed that Trump wants to slap tariffs on China, which is bad news for the Aussie since China is Australia’s main export market.
The Aussie later steadied before recovering when China’s industrial production data surprised to the upside.
Unfortunately for Aussie bulls, selling pressure returned in force when Wednesday’s U.S. session rolled around, thanks to news that British PM Theresa May ordered the expulsion of 23 Russian diplomats over allegations that Russia is responsible for the poisoning of a Russian double agent.
This, caused risk aversion to intensify. And to make matters worse for the Aussie, Kudlow, the man who was later chosen to be Trump’s economic adviser, had these juicy things to say during a CNBC interview:
“China needs a comeuppance on trade. I believe that now.”
“I must say as someone who doesn’t like tariffs, I think China has earned a tougher response not only from the United State.”
“I would buy King Dollar and I would sell gold.”
Not only did Kudlow take a swing at China, he also took a swing at gold, so it’s no real wonder why the Aussie (and gold) steadily and broadly weakened after that.