Heads up, the Land Down Under has tons of top-tier data in store for us this week! Which one will dictate the Aussie’s intraweek trends?
Let’s take a look at the possible catalysts:
Retail sales (June 4, 1:30 am GMT)
Australia’s retail sales came in flat in March, which was softer than what market players were expecting.
The data miss spurred concerns that February’s uptick was mostly due to an influx of Chinese tourists for the month. In fact, the bears were so focused that traders mostly shrugged off a better-than-expected Chinese data release.
This week analysts see a 0.3% uptick after March’s 0.0% figure. A significant miss could weigh on the Aussie, while an upside surprise could bring the bulls to the Aussie’s yard.
Keep in mind that the ANZ job ads will also be printed at the same time, so don’t be surprised if we see higher volatility than the usual!
RBA statement (June 5, 4:30 am GMT)
As expected, the Reserve Bank of Australia (RBA) kept its interest rates steady at 1.50% for another month in May.
Governor Lowe and his team were more upbeat in a quarterly report released a few days later, as they upgraded their inflation forecasts and hinted that higher interest rates will likely be “appropriate at some point.”
However, they were also quick to note that “the Board does not see a strong case for a near-term adjustment in the cash rate.”
This is probably why market geeks are still not expecting any changes from the central bank this week.
That doesn’t mean that we won’t see any movement, though! With no other major economic report on the docket during the Asian session, traders will watch the statement closely for the RBA’s thoughts on “uncertainties” like trade tensions, the degree of spare capacity in the market, and the uncertainty around income growth outlook.
Q1 2018 GDP report(June 6, 1:30 am GMT)
If you recall, he economy had grown by 0.4% in Q4 2017 (2.4% in 2017) thanks to household consumption and government spending contributing to the GDP.
While the report missed its headline estimates, some analysts pointed out that the strength in household consumption helps ease the RBA’s concerns over trends of low wages and higher household debt.
Will consumers (and the government) continue to prop up the economy? Analysts seem to think so. They’re expecting the economy to expand by another 0.8% in Q1 2018 after company profits, wages, and inventories reports hinted at stronger growth for the quarter.
Don’t even think of missing the potentially most volatile report from Australia this week!
Trade balance report (June 7, 1:30 am GMT)
Australia clocked in a trade surplus of 1.53B AUD in March, which marked the best surplus since May 2017. A closer look told us that both exports and imports improved, which supported the RBA’s hawkish bias.
This week traders expect to see the surplus tighten a bit to 1.03B AUD. The Aussie has gone up a bit since the last release, so the expectation is somewhat legit.
In any case, this top-tier report has the tendency to affect the Aussie’s intraday price action, so make sure you’re around when Australia’s Bureau of Statistics (ABS) prints the report!
Last Week’s Price Review
The Aussie is the second weakest currency of the week (as of 6:00 am GMT). The trading week is still not over yet, though, so the Aussie still has a chance to improve its ranking. But if it can’t, then this week’s poor performance would put an end to three consecutive weeks of being on the winning side.
Looking at the overlay of AUD pairs and gold above, we can see that the Aussie didn’t really seem to take directional cues from gold. We can also see that the Aussie’s price action appears rather chaotic.
However, we do get a clearer picture if we simply remove EUR/AUD and AUD/NZD from the overlay.
As you can see, the Aussie had two-way price action action this week. It first took a dive on Monday and Tuesday before recovering on Wednesday and then traded roughly sideways after that.
There were no direct catalysts for the Aussie on Monday, but it’s quite likely that the Aussie was under bearish pressure because of the risk-off vibes on that day, thanks to growing fears that Italy may be headed towards fresh elections.
The narrative that Italy may soon be having fresh elections gained momentum on Tuesday, which resulted in even more risk aversion. And that very likely continued to weigh down on the higher-yielding Aussie, since there weren’t really any direct catalysts for the Aussie’s weakness.
The Aussie finally found support on most pairs come Wednesday. And that was very likely because of the returning risk-on vibes at the time, thanks to positive political developments in Spain and Italy.
Risk-taking was still the name of the game during Tuesday’s Asian session. Instead of rising even further, however, the Aussie got kicked broadly lower when Australia’s CAPEX report printed a 0.4% increase in Q1 2018, which is way off the mark (+1.0% expected). Moreover, the weak reading was due mainly to the 1.3% drop in investments on building and structures, with the manufacturing sector getting the worst of it.
Anyhow, the Aussie eventually regained its poise, likely because risk-taking persisted during Thursday’s morning London session.
Unfortunately (for Aussie bulls), the Aussie’s recovery began to run out of steam when the U.S. session rolled around. And as noted in Thursday’s U.S. session recap, that was due to renewed trade war fears, especially after U.S. Commerce Secretary Wilbur Ross announced that the U.S. will push through with its planned tariffs on aluminum and steel imported from the E.U., Canada, and Mexico.