The RBA is up again this week! Will we see more movement from the Aussie this time? Here are other catalysts that might affect the Aussie over the next couple of days.
RBA’s statement (July 3, 4:30 am GMT)
We know from last month’s statement that the Reserve Bank of Australia (RBA) thinks that data are consistent with a growth rate of 3.0% and above, but also maintained its concerns over household consumption and “uncertainties” such as international trade, political developments, and economic developments (in some emerging economies).
Its meeting minutes was a bit more interesting when it removed its “next move in the cash rate would be up, rather than down” bit from the previous release.
The Aussie has fallen quite a bit since last month, but trade war threats have also heated up in the past few weeks. Will these lead to the RBA feeling more hawkish or dovish this month?
Retail sales and trade balance (July 4, 1:30 am GMT)
Retail sales showed a 0.4% growth in April, which beat the 0.0% reading that analysts had expected. It also helped extend the Aussie’s gains on a risk-friendly trading session.
Meanwhile, Australia’s trade surplus had also narrowed down to its tightest in four months in April, which dragged the Aussie a few pips lower on a day that traders weren’t feeling the love for higher-yielding assets.
This week market players are expecting retail sales to chill to only a 0.3% growth, while trade the trade surplus is estimated to improve from 0.98B AUD to 1.21B AUD in May.
Don’t even think of missing them! Not only can these top-tier releases induce spikes, but they can also help set the tone for the Aussie’s intraday (and even intraweek) price action.
Overall risk sentiment
This week both Washington and Beijing could share more about the tariffs that are kicking in on July 6. If China and the U.S. threaten additional taxes on each other’s products, then we might see more risk aversion and Aussie weakness across the board.
And then there’s the political showdown in Germany. Angela Merkel’s Interior Minister and CSU leader Horst Seehofer just offered to resign from all offices, saying that his conflict with the Chancellor over migration is affecting the “credibility” of his role as party leader.
For now, Seehofer’s resignation is igniting speculations of Merkel losing her coalition and maybe losing more support from both critics and allies. Watch for its impact on the euro as well as other high-yielding currencies!
Last Week’s Price Review
The Aussie is on the losing side yet again this week (as of 6:00 am GMT), which would mark the fourth week of net losses for the Aussie.
From the looks of it, the Aussie appears to be tracking gold prices again this week. And since gold prices fell, so did the Aussie.
Like last week, however, risk sentiment also played a part in the Aussie’s price action. Risk aversion prevailed for the most part, though, thanks largely to trade war fears, so the effects of risk sentiment on the Aussie price action isn’t as clear.
However, a clear example of how risk sentiment had an effect on the Aussie’s price action is what happened on Thursday since gold prices were still falling then but the Aussie actually traded mostly higher that day, likely because there were bouts of risk-taking during Thursday’s Asian session and U.S. sesion.
And as a side note, the Aussie also got kicked lower when China devalued the yuan early on Wednesday. In fact, only the Kiwi took a harder hit when China announced the devaluation. Although that’s likely because the Kiwi was getting extra selling pressure from ANZ’s disappointing business outlook report, which was released just before China devalued its currency.
As to why the Aussie reacted negatively to the devaluation, well, that’s because the devaluation raised concern about China’s growth prospects, which is also bad for the Aussie because China is Australia’s main export market. Also, the devaluation announcement caused commodities (including gold and iron ore) to slump broadly lower, which is also bad for the Aussie.
Anyhow, risk sentiment appears to be improving during Friday’s Asian session and gold is climbing to boot. Also, the Aussie got a bullish boost on Friday when China announced that it will allow more foreign investments.
And since the trading week is not yet over, then that means that there’s still a chance that the Aussie may improve its ranking. There’s even a chance that the Aussie may close out the week as a net winner.