Choppy week for Aussie pairs that moved on both fresh Australian and Chinese catalysts, as well as counter currency flows.
Australia Headlines and Economic data
- Australia job advertisements post biggest annual drop in 5 years
- Australian building approvals bounce slightly but they’re still way lower than a year ago
- Australia current account deficit down to $7.2b
- RBA keeps interest rates on hold, giving a cooling economy the benefit of the doubt
- Australia GDP slowdown opens door wide for rate cuts this year
- Australian retail sales soft in January
- Australia’s trade balance sharply widens in January, highest monthly surplus since end-2016
- Australia Construction Index Rises To 43.8 In February – AiG
Major Market Drivers for the Australian Dollar
Australian dollar pairs were all over the place this week, more influenced by counter currency catalysts and Chinese economic updates than Australian updates and even global risk sentiment; especially in the latter half of the week.
Global risk sentiment was on the downswing this week to risk aversion levels, likely due to a refocus on weakening global economic data, especially when it comes to global trade. For a broad recap of this past week’s shift in global risk sentiment, check out my light coverage of this theme in my Japanese yen weekly review. This influence is likely the reason why we saw the Aussie under perform and close in the red against the safe havens (JPY and USD) and the Kiwi dollar, probably the only major currency that didn’t have a significant economic update this week.
The rest of the majors had a rough go on the week thanks to negative catalysts (EUR, CHF, and GBP as Brexit negotiations go no where; CAD lower after dovish BOC statement and weak housing and PMI data), which was enough pressure to haven them under perform against the Australian dollar who was weakened itself.
And yes, the Aussie did have negative catalysts of its own. First, we saw a broad move lower in Aussie pairs a couple of hours before the Reserve Bank of Australia’s monetary policy meeting. This was likely due to a reaction to the weak China services PMI data update, falling to a 4-month low of 51.1. Remember that China is one of Australia’s biggest trading partners, so economic updates there tend to see reactions from the Australia dollar.
And from Australia, one got one clear uniform move from an Aussie catalyst, the weak read on fourth quarter GDP of 0.2%, lower than the previous low read of 0.3%. This prompted a rise in odds that the RBA will cut interest rates once or twice this year, which is likely the reason we saw the uniform fall in Aussie pairs during the Wednesday morning Asia session.