We’ve got top-tier reports scheduled from the Land Down Under this week! Will these help the Aussie recover from last week’s losses?
Here’s a list of the catalysts you should pay attention to:
Quarterly CPI (Oct. 31, 12:30 am GMT)
While a quarterly growth of 0.4% and an annualized uptick of 2.1% are nothing to sneeze at, last quarter’s numbers concerned analysts because it had marked the SEVENTH consecutive quarter that the report had missed market expectations.
Better employment conditions and higher wages, as well as droughts in Australia are expected to raise consumer prices. However, falling commodities prices and changes in the way childcare is measured in the CPI are expected to weigh on overall numbers.
This week, analysts expect to see a 0.5% growth for Q3 2018. If the actual figures miss again, then we might see the Aussie stumble against its major counterparts.
China’s PMI reports (Oct. 31, 1:00 am GMT)
At the heels of Australia’s CPI release is China’s manufacturing and non-manufacturing PMIs. If you recall, the Chinese government got busy last week announcing all sorts of stimulus for the economy. Unfortunately, few were impressed.
This week market geeks are looking for the manufacturing PMI to come in at 50.6, slower than September’s 50.8 reading. Meanwhile, the non-manufacturing release is expected to maintain its 54.9 figure.
Significant weaknesses in the releases could bring back the Aussie bears as they price in weaker Australian export demand from China. On the other hand, stronger-than-expected numbers could bring pips back to the Aussie’s yard, at least during the trading session.
Trade balance (Nov. 1, 12:30 am GMT)
Australia printed a trade surplus of 1.60B AUD in August, which is stronger than July’s numbers and what markets had expected.
Unfortunately, all eyes were on lower-yielding bets at the time, so the Aussie didn’t really get a boost from the report.
This week analysts are looking for a surplus of 1.70B AUD for the month of September. Keep an eye out for changes in goods exported to China, as traders are especially wary of China’s weakening economic prospects right now.
Retail sales (Nov. 2, 12:30 am GMT)
Retail activity inched 0.3% higher in August, which exceeded July’s numbers AND analysts’ expectations.
This week market players are looking to see another 0.3% growth for the month of September. Take note, however, that last month’s better-than-expected print was mostly ignored when risk aversion in the markets gripped traders’ attention.
Make sure you consider overall risk sentiment when trading high-yielding bets like the Aussie!
Last Week’s Price Review
The Aussie’s two-week winning streak may end this week since the Aussie is currently mixed but a net loser for the week (as of 6:00 am GMT).
Despite the mixed performance, AUD pairs actually had somewhat uniform price action, so the Aussie wasn’t just a mere victim of its peers.
With that said, the Aussie didn’t really take a lot of directional cues from gold prices and the yuan this week.
Instead, the main driver for the Aussie’s price action this week was risk sentiment, although Greenback strength also helped (in limiting the Aussie’s gains).
The Aussie started the week by tumbling a bit, likely because of political uncertainty due to news over the weekend that Australia’s ruling coalition lost its majority in the House of Representatives.
Gold prices also began tilting to the downside and the Greenback strengthened to boot, so the Aussie continued to drift lower on most pairs, even though risk-taking prevailed for the entire day.
Gold began to recover during Tuesday’s Asian session and then switched into rally mode during Tuesday’s London session, but the Aussie only grudgingly recovered, likely because risk aversion made a comeback back then.
Risk sentiment recovered during Tuesday’s U.S. session, though, so the Aussie finally got a chance to lick its wounds, even as gold prices began to turn lower.
Unfortunately for the Aussie, risk aversion returned in force when Wednesday’s U.S. session rolled around, so the Aussie was forced to beat a hasty retreat.
The Aussie then took directional cues from gold prices during Thursday’s Asian session, but diverged from gold prices during Thursday’s London session, very likely because of the risk-friendly vibes in Europe.
Risk sentiment flipped back to risk-off during Friday’s Asian session, however, so the Aussie slumped against everything (except NZD).
It also probably didn’t help that the Chinese yuan began moving lower on Friday after being range-bound for most of the week.