The Aussie tossed and turned to the rhythm of gold and risk sentiment last week. Will Australia have any major reports to add to the mix this time?
Inflation reports (April 24, 1:30 am GMT)
Australia’s quarterly report turned out to be a pain for the Aussie back in January when the numbers crushed expectations of any near-term hike from the Reserve Bank of Australia (RBA).
This time around analysts are expecting inflation to come in at 0.5% for Q1 2018 after its 0.6% growth in the previous quarter. Meanwhile, the trimmed mean CPI – RBA’s more favored indicator – is expected to show 0.5% after clocking in at 0.4% in Q4 2017.
With RBA’s latest meeting minutes hinting that the slow pace of “having inflation return to the midpoint of the target” made them believe that there’s “not a strong case for a near-term adjustment in monetary policy,” it’s likely that we will see slower or stagnant consumer prices for the quarter.
Still, keep your eyes peeled for any surprises!
Overall risk sentiment
As you can see below, the Aussie fell victim to risk aversion following weekend headlines of the U.S. launching missile strikes in Syria. And while the issue has subsided since then, the world will be watching for the earliest signs of other conflicts arising or being settled (as in North Korea’s case).
And then there’s the teeny tiny issue of trade war between China and the U.S. If China decides to retaliate over the U.S. banning American companies to be friends with China’s ZTE company, or if either party threatens even more sanctions on each others’ goods, then we might see trade-related fears come back full force.
Last Week’s Price Review
The Aussie is currently mixed for the week (as of 6:00 am GMT). However, AUD pairs actually had roughly uniform price action, which implies that the Aussie wasn’t merely being boosed around by its peers.
If the Aussie’s roughly uniform price action isn’t very clear to you, then just remove AUD/NZD and GBP/AUD from the overlay to get this:
That’s a clearer picture, right? Anyhow, AUD pairs were (as always) taking some directional cues from gold prices.
This can be seen when the Aussie climbed higher as gold climbed higher on Wednesday, as well as on Thursday when the Aussie slumped as gold prices slumped.
Incidentally, Australia’s jobs report was released on Thursday and that report was unfortunately a disappointment, which caused the Aussie to drop as a knee-jerk reaction.
However, gold was on the rise at the time, and the Aussie was apparently taking directional cues from gold since it quickly bounced back up.
Speaking of gold and the Aussie, something else was preventing AUD pairs from tracking gold prices too closely, especially on Monday and Tuesday. And that something else was apparently risk sentiment.
Gold was trading sideways while tilting slightly to the upside on Monday. However, the Aussie was feeling a bit under the weather. And that was likely due to the prevalence of risk aversion on Monday, thanks to lingering geopolitical tensions after Trump ordered a massive missile strike on Syria over the weekend, supposedly to punish Assad for an alleged gas attack, even though Assad already won it that area and there’s no evidence that the Syrian government did it.
Tuesday, meanwhile, saw gold prices initially drop before recovering. However, the Aussie had a mixed performance and was mostly trading sideways. And that was likely because of the returning risk-on vibes during Tuesday’s London session.
As a side note, Tuesday also saw China’s industrial production data, which failed to impress, as well as the RBA’s meeting minutes, which only reiterated RBA Guv’nah Lowe’s message that there’s “not a strong case for a near-term adjustment in monetary policy.” Their negative impact on the Aussie’s price action was only limited, though.