We’ve got a busy week ahead for the Aussie with tons of top-tier Australian reports on tap. Here’s what you can expect from the events.
RBA’s monetary policy decision (April 3, 4:30 am GMT)
As expected, the RBA kept its policies steady for another month in March. What caught the market players’ attention was the central bank’s apparent concern over rising household debt and its impact on consumption.
Still, nothing new from the RBA, which is why the Aussie showed limited reaction to the release.
Market players are expecting the RBA to sit on its hands for another month, so unless Governor Philip Lowe and his team are particularly concerned about an issue, or if Asian session traders got nothing else to price in at the time of the release, we’ll probably see another snoozer from the central bank.
Retail sales and building approvals (April 4, 1:30 am GMT)
One reason why traders had limited reaction to the RBA’s event is that Australia had printed its current account and retail sales report a few hours earlier, and both had shown weaker-than-expected results.
Retail sales, in particular, only grew by 0.1% when analysts had expected a 0.4% uptick in January compared to December’s 0.5% decrease.
This time around investors are expecting to see a 0.3% increase for the month of February. The building approvals report, which showed a whopping 17.1% increase last month (but was shrugged off due to stronger risk aversion) is expected to retrace by 4.8% in February.
Oh, and keep an eye out for China’s services PMI due 15 minutes after the reports are released! Taken together, these three reports could dictate the Aussie’s intraday price action, if not set a trend that would last a couple of trading sessions.
Trade balance report (April 5, 1:30 am GMT)
Back in January Australia saw a seasonally adjusted trade surplus of 1.06B AUD, which marks the largest surplus since September 2017.
Turns out, significant jumps in gold and transport equipment exports boosted Australia’s trade numbers. Aussie bulls partied in the pip streets as it pointed to a pretty strong start to Australia’s Q1 2018 GDP.
This time around analysts are expecting the surplus to wind down to 0.72B AUD in February. Since there are no other top-tier reports scheduled around the time of the release, we could see a bit of reaction among Aussie pairs at the slightest hint of weakness or strength.
Last Week’s Price Review
The Aussie had a mixed performance but was a net winner this past week. This is a welcome respite after two consecutive weeks of net losses and after being a net loser in 8 of the past 10 weeks.
The Aussie had a mixed start but was clearly taking directional cues from gold (as usual). And this clearly showed when the higher-yielding Aussie dipped on Tuesday, even though risk-taking prevailed for the most part due to rumors that China and the U.S. are negotiating in order to avoid a potential trade war.
Gold prices continued to tank on Wednesday, supposedly because of the Greenback’s relative strength, market analysts say. And this ultimately pulled AUD pairs below last week’s closing prices.
But as you can see in the overlay of AUD pairs and gold, the Aussie later decoupled from gold prices because the Aussie opted to climb pretty much across the board, although selling pressure did eventually win out on AUD/USD.
Still, this buying pressure was enough to allow the Aussie to recover a large chunk of its losses.
There were no direct catalysts that could have ignited demand for the Aussie itself. However, the Aussie stopped tracking the slide in gold prices and began to encounter buyers shortly after word got around that North Korean Boss-Man Kim Jong Un met China’s Boss-Man Xi Jinping, likely because of easing geopolitical jitters. Although it’s also likely that traders were betting that China will use North Korea as a chess piece in order to avoid a trade war, given that Trump and Kim are expected to meet in order to discuss the possible denuclearization of North Korea.
And if you’re a newbie who’s wondering why potentially good news for China is also a good thing for Australia, that’s because China is Australia’s primary export market.
Of course, another possible reason for the Aussie’s rise is month-end and quarter-end flows because, as I mentioned earlier, the Aussie has been a net loser in 8 of the past 10 weeks. Some short-covering is therefore likely, especially since another RBA statement is coming up.
Moving on, bullish pressure on the Aussie was persistent, so much so the Aussie continued to make its way higher. However, the Aussie also got another noticeable bullish infusion on Thursday, likely because risk appetite got revived. Although month-end and quarter-end flows ahead of next week’s RBA statement is also still a possibility.
Anyhow, the Tuesday slide and the later recovery on Wednesday and Thursday resulted in the Aussie’s mixed performance this week, even though gold was down in the dumps.