No top-tier reports scheduled from the Land Down Under this week! Will RBA’s events push the comdoll higher though?
Here’s a list of this week’s potential catalysts:
RBA’s meeting minutes (June 19, 1:30 am GMT)
As you know, the Reserve Bank of Australia (RBA) maintained its policies for another month in June.
While the central bank is optimistic that there will be gradual progress on its inflation and employment goals, it also shared that uncertainties such as “political developments” in Italy; “direction of international trade policy” in the U.S., and “economic developments in a few emerging market economies” are keeping them at bay.
In addition to that, the RBA is still worried about household consumption that’s threatened by slow income growth and growing household debt levels.
We might hear more about what exactly the RBA’s concerns are in the meeting minutes but, unless we see surprises from the central bank, then traders will more likely focus on other bigger economic themes at play.
Gov. Lowe’s speech (June 20, 1:30 pm GMT)
In his speech last week the RBA head honcho shared that any rate hike will be “some time away,” as “there is not a strong case for a near-term adjustment in monetary policy” just yet.
Philip Lowe will have a chance to repeat his statement in a speech in Portugal this week. Will the bears react accordingly instead of shrugging it off like they did last week?
Trade war concerns
While the Donald is all for peace in the Korean peninsula, it seems like his administration has no problem waging (trade) war against Uncle Sam’s major trading partners.
Word around the hood is that Trump and his team are ready to slap tens of billions worth of tariffs on China’s goods as early as this week, which could prompt the world’s second largest economy to retaliate and escalate the skirmish into a full-blown trade war.
Since Australia’s exports depend heavily on demand from China, any escalation in trade war rhetoric is bound to bring the bears to the Aussie’s yard.
Last Week’s Price Review
The Aussie finished mixed but a net loser last week. And it followed up that poor performance with an even poorer performance since the Aussie is currently the biggest loser of the week (as of 6:00 am GMT).
The Aussie actually had a promising start, thanks to the risk-on vibes on Monday and the slight upward tilt on gold prices. Risk aversion returned during Tuesday’s morning London session, though, so the higher-yielding Aussie was forced to turn lower.
Risk appetite got revived ahead of the FOMC statement and gold prices began to tilt to the upside again, so the Aussie was able to recover and even shrugged off RBA Guv’nah Lowe’s dovish comments that:
“Any increase in interest rates, however, still looks to be some time away”
“[T]his increase [in interest rates] is likely to be only gradual. Given this, there is not a strong case for a near-term adjustment in monetary policy.”
But then again, those have been the RBA’s forward guidance for some time now, so those comments are not really surprising.
Anyhow, the Aussie was later forced to resume its downhill trek when the Fed announced a rate hike while also upgrading the projected path for the Fed Funds Rate to show two more hikes this year, which put monetary policy divergence and interest rate differentials into play because, as mentioned earlier, the RBA is not looking to hike rates anytime soon.
The Aussie kept moving lower after that before tossing and turning when Australia’s jobs report was released since the report looked mixed on the surface.
Sellers eventually prevailed, however, since the jobs report was actually mixed overall. Also, China released a bunch of disappointing economic reports, which caused risk aversion to return and raised concerns about Australia’s own growth prospects, kicking the Aussie lower. After all, China is Australia’s main export market.
Australia’s net negative jobs report, China’s poor data, and the risk-off vibes then likely continued to weigh on the Aussie after since the Aussie continued to tumble even as gold prices began to rise.
The Aussie did jump higher against some of its peers when the ECB statement caused risk appetite to make a strong comeback. Sadly, demand for the Aussie later evaporated when the U.S. printed a better-than-expected retail sales reading, which likely put monetary policy divergence and interest rate differentials into play once again.
And to make matters worse for the Aussie, gold prices began to dip during Thursday’s U.S. session and risk aversion returned during Friday’s Asian session as investors prepared for the U.S. to announce tariffs against China later, market analysts say.