Not a lot of top-tier catalysts from Australia, so y’all make sure you keep your eyes on these events in the next few days!
Private capital expenditure (Nov. 29, 12:30 am GMT)
Back in August, we saw that capital expenditure had dipped by 2.5% in Q2 2018. Traders didn’t care for the miss, especially since components that contribute to the GDP saw declines.
This time around analysts expect to see a 1.1% increase in Q3 2018. Aside from the headline numbers, make sure y’all also look at GDP-contributing factors such as manufacturing, mining, and services.
Overall risk sentiment
Much like the Kiwi, Aussie’s price action is also sensitive to Greenback demand and overall risk sentiment.
The G20 meetings at the end of the week (and statements shared by the leaders’ teams ahead of the event) will take the spotlight over the next couple of days as G20 leaders attempt to resolve a couple of global concerns.
Keep your eyes peeled for Brexit-related developments as Theresa May tries to finalize a deal with the EU.
And then there’s the highly-anticipated meeting between Trump and Xi Jinping. While both the U.S. and China have shown willingness to reach a trade deal, will they get over their differences soon enough to hint at one this week?
Last Week’s Price Review
The Aussie’s three-week winning streak may soon be coming to an end since the Aussie is currently the worst-performing currency of the week (as of 7:00 am GMT).
Gold is currently poised for a positive week, so the Aussie obviously didn’t track gold prices this week.
Having said that, many AUD pairs opened the week by gapping lower, thanks to news over the weekend that APEC leaders failed to agree on a communique for the first time, as well as renewed trade war jitters because of Chinese President Xi Jinping and U.S. Vice-President Mike Pence launched verbal salvos against each other during the APEC Summit.
It also didn’t help that risk aversion began to win out as the day progressed, dragging most AUD pairs even lower.
Tuesday was no better for the Aussie since risk aversion was still the dominant sentiment.
The Aussie also got a noticeable bearish kick across the board when an IMF report was released during the Asian session since the report stated that (emphasis mine):
“The balance of risks to [Australia’s] economic growth is tilted to the downside with a less favorable global risk picture. A weaker-than-expected near-term outlook in China coupled with further rising global protectionism and trade tensions could delay full closure of the output gap, although there are also upside risks to the terms of trade in the near term.”
“Notwithstanding recent strong growth, it is not yet the time to withdraw macroeconomic policy support given remaining slack. With the cash rate at 1.5 percent, monetary policy remains appropriately accommodative. Normalization should remain conditional on evidence of more substantive upward pressures on wages and prices, as inflation is still below the target range. The broadly neutral fiscal policy stance is welcome.
As a side note, the minutes of the RBA’s latest monetary policy meeting were also released during Tuesday’s Asian session, but they didn’t seem to have any noticeable impact on the Aussie’s price action, probably because the minutes didn’t really reveal anything new.
However, RBA Guv’nah Lowe’s speech during Tuesday’s morning London session apparently caused a bearish reaction, probably because Lowe warned that Australia’s growth may ease in 2020 “as the boost from the large increase in liquefied natural gas exports tapers off.” Lowe also warned that inflation is expected to pick up gradually but “to remain low.”
Despite those warnings, Lowe still said that “the probability of an increase in interest rates is higher than the probability of a decrease.” But as usual, Lowe repeated the RBA’s forward guidance that:
“[T]he Board does not see a strong case for a near-term change in interest rates. There is a reasonable probability that the current setting of monetary policy will be maintained for a while yet.”
Moving on, the Aussie would eventually find support as risk sentiment began to improve come Wednesday.
And more AUD bulls were enticed to charge during Wednesday’s London session, thanks to a report that the WTO will set up a dispute resolution panel to rule on U.S. tariffs on aluminum and steel, which likely raised hopes that the ongoing trade war will finally de-escalate.
Also, there was this Fed-related rumor that was making the round back then, which gave the Greenback a bearish kick while boosting commodities and the comdolls:
🇺🇸 The Federal Reserve is starting to consider at least a pause to its gradual monetary tightening and could end its cycle of interest rate hikes as early as the spring, MNI reports, citing senior people at the #Fed they didn’t identify.
— Christophe Barraud🛢 (@C_Barraud) November 21, 2018
There was some follow-through buying after that. However, buying pressure eventually evaporated and the Aussie’s price action became a bit more mixed but mostly range-bound.
All AUD pairs failed to climb above last week’s closing prices, though, so the Aussie is currently the biggest loser of the week.