Will the RBA keep its rates steady as expected this week? Check out which catalysts can move the Aussie over the next couple of days!
RBA statement (November 6, 3:30 am GMT)
Analysts widely expect the Reserve Bank of Australia (RBA) to hold its interest rates at 1.50% for a 27th consecutive month in November.
And why not? The central bank seems happy enough with its neutral tone, saying that further progress in employment and inflation will be “gradual,” and that holding its policies steady “would be consistent with sustainable growth in the economy and achieving the inflation target over time.”
That doesn’t mean the event will be a non-mover, though! Keep an eye out for comments over inflation, housing prices, and the labour market, as they could set the tone for the RBA’s quarterly projections due on Friday at 12:30 am GMT.
U.S. mid-term elections
Aussie bulls and bears like taking cues from overall risk sentiment, so you can bet your pips that they’ll be watching the outcome of the U.S. mid-term elections.
While the event doesn’t usually move currencies for long, the tight nature of the races in the House presents risks to Trump’s promised policies.
If Democrats take control of the House, then we might see more pushback in policies such as additional tax cuts and budget for the wall.
If the Republicans maintain control of the House, however, then Trump will likely have enough support to further his policies.
Make sure to keep your eyes glued to the tube in case we see game changers in the results!
Last Week’s Price Review
After last week’s disappointing run, the Aussie is turning in a much better performance since the Aussie is currently the second top-performing of the week (as of 8:00 am GMT).
And the Aussie’s strong performance this week was driven mainly by the prevalence of risk appetite, Australia’s better-than-expected trade report, and growing hopes that the U.S. and China can sit down and reason together to finally put an end to the ongoing trade war.
The Aussie had a promising start, thanks to the risk-friendly vibes in Asia. However, gold prices turned lower later and risk aversion even made a comeback during Monday’s U.S. session, so AUD pairs were forced to give back their gains.
Gold prices continued to drift lower on Tuesday. But fortunately for the Aussie, risk sentiment flipped back to risk-on during Tuesday’s Asian session. Moreover, Trump said during an interview that he thinks the U.S. and China will be able to hammer out ”a great deal.”
Interestingly enough, Trump also warned during the same interview that he’s ready to slap even more tariffs against China if China won’t play nice, but the market was apparently more focused on the positive message.
In any case, the Aussie’s rally would stall during Tuesday’s U.S. session. The Aussie was well-supported, though, even though gold prices continued to fall and Australia’s Q2 CPI report failed to meet expectations (0.4% vs. 0.5% expected).
And oddly enough, China’s disappointing PMI reports didn’t really drag AUD pairs down. In fact, support began to form on most AUD pairs after those PMI reports were released.
Anyhow, AUD bulls got their second wind and propelled the Aussie broadly higher on Thursday. And the apparent catalyst for the Aussie’s rise was Australia’s better-than-expected trade report ($3.02B vs. $1.71B expected).
However, the Aussie may have also been boosted by news that China’s Politburo has hinted that more stimulus are planned.
It also very likely helped that November started with a bout of risk-taking.
Moreover, Trump tweeted the following later, which gave the Aussie an extra bullish boost.
Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea!
— Donald J. Trump (@realDonaldTrump) November 1, 2018
The Aussie was eventually forced to pare its gains when Australia’s retail sales report failed to impress on Friday (0.2% vs. 0.3% expected).
However, AUD bulls would renew their offensive later when a Bloomberg report came out since the report cited “four people familiar with the matter” as supposedly saying that Trump “has asked key U.S. officials to begin drafting potential terms” for a trade deal with China.