G’day mates! While Game of Thrones fans probably won’t have much to talk about this week, Aussie traders have FIVE major catalysts to look forward to. Make sure you prep for these market movers if you’ve got any AUD trades open or if you’re planning on taking any.
1. RBA decision (Sept. 5, 5:30 am GMT)
Talk about starting the month with a bang! The Reserve Bank of Australia will be the first among its central bank peers to make a monetary policy announcement in September.
No actual interest rate changes are expected, though, but that doesn’t mean the event would be a dud. In their previous policy statement, the RBA ruffled some feathers (hawkish ones, that is) by attempting to downplay the recent improvements in the Australian economy.
In particular, policymakers highlighted the growth slowdown in the first quarter of the year, citing only that the “Australian economy is expected to strengthen gradually.” Apart from that, RBA officials also warned that inflation “remains subdued” and even spurred speculations of potential downgrades in their upcoming statement.
But it wasn’t all that downbeat. In their official monetary policy statement, the central bank noted that “employment growth has been stronger over recent months” and that “higher prices of electricity and tobacco are expected to boost CPI inflation.”
The RBA might continue to express some concern about Aussie appreciation since they already previously stated:
“The higher exchange rate is expected to contribute to subdued price pressures in the economy… An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.”
2. GDP (Sept. 6, 2:30 am GMT)
Australia’s Q2 GDP report should give the RBA statement a bit more context and allow traders to gauge whether or not the economy is performing in line with central bank expectations.
After printing a 0.3% growth figure in the first quarter of the year, the Land Down Under could post a much faster pace of expansion at 0.8% for Q2 2017. Central bank officials did note that the unimpressive growth reading in the first quarter “partly” reflected temporary factors.
A higher than expected GDP reading could keep traders hopeful that the RBA might still have room for an interest rate hike before the year comes to a close. On the other hand, a disappointing read could signal that monetary policy could stay unchanged for much longer.
3. Retail Sales (Sept. 7, 2:30 am GMT)
Consumer spending accounts for a huge chunk of overall economic activity, so the retail sales report tends to generate a significant currency reaction. To top it off, it also serves as an indicator of demand and future business activity.
For the month of July, an uptick of 0.2% in retail sales is eyed, slightly slower than the earlier 0.3% gain. Keep in mind, however, that three out of the last five releases have been coming in higher than consensus so there’s a good chance that the actual read could overshoot estimates again.
4. Trade Balance (Sept. 7, 2:30 am GMT)
Right along with the retail sales report is the trade balance, which indicates how import and export activity fared. Now the Australian economy is heavily-dependent on its export sector, so robust demand for its commodity shipments would be bullish for the currency.In the previous release, the trade surplus was cut by more than half from 2.02 billion AUD to 0.86 billion AUD due to a 1% drop in exports outweighed by a 2% jump in imports. This signaled weaker external demand and potentially lower revenues for Australian exporters.
However, the trade surplus is expected to widen to 0.95 billion AUD in July, suggesting a rebound in trade activity that would likely have a larger contribution to the next set of growth figures. Previous releases have been a mixed bag of hits and misses, though, so it’s hard to determine the odds of the actual figure meeting expectations.
5. Chinese trade balance (Sept. 8, Asian session)
Last but certainly not least is the Chinese trade balance due anytime during Friday’s Asian trading session. In case you’re wondering how a report all the way from China could impact Aussie price action, lemme tell you that this world’s second largest economy is actually Australia’s trade BFF, with the two nations exchanging nearly a hundred billion dollars’ worth of products each year.
This suggests that an increase in Chinese imports would reflect strong demand for Australia’s commodity products, particularly iron ore. At the same time, a healthy gain in exports would be indicative of sustained global appetite for goods made in China, thereby keeping demand for raw materials supported down the line.
The trade surplus is projected to widen from $46.7 billion to $48.6 billion in August, following an increase from the July $42.8 billion surplus. In fact, China’s trade balance has been steadily gaining since February this year, showing a sustained rebound for the Asian superpower.