Much like the Kiwi, the Aussie took advantage of the dollar’s weakness. Unlike its fellow comdoll, however, it also took cues from Australia’s data releases.
Let’s see the possible catalysts for the Aussie this week:
Mid-tier leading indices
We won’t see any top-tier data releases from the Land Down Under this week, but we will see the CB leading index printed today at 2:30 pm GMT followed by the MI leading index on Wednesday at 12:30 am GMT.
Remember that traders usually pay closer attention to the MI’s release because the report is more recent. Will the index improve from its 0.2% decrease in April?
Lowe’s speech (May 23, 8:00 am GMT)
On Wednesday Reserve Bank of Australia (RBA) Governor Philip Lowe will give a speech in Sydney. Word around the hood is that he will talk about issues relating to China’s economy and the financial system.
Audience members get to ask questions from the RBA head honcho, so make sure you pay attention to any hints on the RBA’s biases! If you recall, the central bank recently shared that its next move will be “up, rather than down” even as it’s firm that there was no “strong case for a near-term adjustment in monetary policy.”
Overall risk sentiment
Though Australia won’t be printing top-tier economic reports, catalysts of other major currencies might cause ripples on the Aussie’s price action.
A potentially eurosceptic government in Italy, for example, could drag on EUR/AUD.
And then there are geopolitical and trade-related news like headlines on Iran’s sanctions, Kim Jong-Un’s meeeting with Trump, and U.S.-China trade deals, which could affect demand for high-yielding currencies like the Aussie.
Last Week’s Price Review
The Aussie is mixed for the week (as of 6:00 am GMT). However, AUD pairs did have roughly uniform price action, which is a sign that the Aussie wasn’t just being pushed around by its peers.
Looking at the overlay of AUD pairs above, we can see that AUD pairs were tracking gold prices at first but began to decouple from gold prices on Wednesday since gold traded sideways for the rest of the week while most AUD pairs were tilting to the upside.
This becomes more obvious if we remove AUD/NZD from the overlay.
See? By the way, the minutes of the RBA’s May monetary policy huddle were released on Tuesday. That was a dud, however, since there wasn’t really anything surprising and the RBA merely repeated its forward guidance that “it was more likely that the next move in the cash rate would be up, rather than down” while also stressing that “there was not a strong case for a near-term adjustment in monetary policy.”
Getting back on topic, gold recovered a bit during Wednesday’s Asian session. However, the Aussie got kicked lower when Australia’s wage price index came in below expectations (0.5% vs. 0.6% expected).
Instead of weakening further, the Aussie quickly bounced back and then continued to power mostly higher, even though gold began to trade sideways and despite the prevalence of risk aversion at the time.
The likely reason for this is that the Aussie was feeding off the Greenback’s weakness at the time since U.S. bond yields slipped and the Greenback began to feel some selling pressure after word got out that North Korea was supposedly threatening to walk away from talks as a response to U.S. National Security Advisor (and notorious warmonger) John Bolton’s “colorful” comments.
Greenback demand didn’t recover by Wednesday’s morning London session, likely because of the dip in U.S. bond yields. And that likely helped to keep the Aussie supported. Although the Aussie also likely benefited from opposing currency moves at the time since the European currencies (EUR, GBP, CHF) were all getting hammered.
Risk sentiment finally recovered during Wednesday’s U.S. session and that likely helped to sustain the Aussie’s bullish run.
The Aussie then got a final bullish boost when Australia’s jobs report surprised to the upside by revealing that 22.6K jobs were generated (+19.8K expected). Also, risk-taking prevailed at the time.
After that, it looks like the Aussie began taking directional cues from gold prices again and most AUD pairs began to trade somewhat sideways.