Heads up, Aussie traders! Better keep tabs on these top-tier catalysts lined up this week if you’ve got AUD trades on your account. Here’s a quick rundown of what’s each event is all about and what market gurus are expecting.
1. RBA interest rate decision (Sept. 6, 4:30 am GMT)
Talk about starting the week with a bang! The Reserve Bank of Australia will be announcing its monetary policy decision on Tuesday’s Asian trading session, likely setting off some fireworks for Aussie pairs then. For the newbies out there wondering what the fuss is all about, lemme tell you that these central bank statements tend to spark a lot of short-term volatility and set the tone for longer-term price action especially when big announcements are made.
No actual policy changes are expected for this week, though, as RBA head Stevens and his fellow policymakers might simply keep interest rates unchanged at 1.50%. After all, the Australian central bank just lowered interest rates by 0.25% last month so they might prefer to wait for its effects to kick in before cutting again. Besides, RBA officials did express some concern that lowering rates further could worsen the property bubble in the Land Down Under.
Still, any words of caution from head honcho Stevens could keep a lid on the Aussie’s gains as this would suggest that the RBA would keep the door open for more easing probably later in the year. Recent reports from Australia haven’t been so impressive, with private capital expenditure and retail sales showing a sharp slowdown last week.
2. Australia’s Q2 GDP (Sept. 7, 1:30 am GMT)
Next up, we’ll get a clearer picture of how the Australian economy has fared in the second quarter of this year with the GDP report set to be printed on Wednesday’s Asian trading session. In case you missed it in our School of Pipsology lesson on Fundamental Analysis, GDP stands for gross domestic product, which basically indicates whether the economy expanded or contracted during the period.
Now a strong growth figure tends to be bullish for a currency because this could bring its central bank closer to tightening monetary policy or hiking interest rates. On the other hand, a weak GDP reading or a negative one could trigger currency depreciation since it puts the central bank on track towards easing.
For Q2, a feeble 0.4% growth figure is eyed for Australia, much slower than the 1.1% expansion seen in the first quarter of the year. The main GDP components namely business investment, consumer spending, and export activity have been mostly weaker than expected from April to June so it might not be such a huge surprise if the actual reading falls short of consensus.
3. Australian trade balance (Sept. 8, 1:30 am GMT)
On Thursday, we’ll get another glimpse into Australia’s trade activity with the July trade balance up for release. This is a pretty huge deal for the economy and is usually considered a leading growth indicator because exports account for nearly 20% of Australia’s GDP.
Australia has been reporting trade deficits since mid-2014, which means that it has been importing more goods than it has been exporting. However, the shortfall is expected to narrow from June’s 3.20 billion AUD deficit to just 2.65 billion AUD in July, possibly indicating a significant pickup in external demand.
Of particular interest would be any major changes in the value of goods exported to China, which is Australia’s trade BFF and the world’s second largest economy. And that brings us to the next top-tier event…
4. Chinese trade balance (Sept. 8, Asian session)
Yep, China is also printing its own trade figures on Thursday’s Asian session but this report will be for the month of August, serving as the earliest leading indicator for China’s appetite for Australia’s commodity exports. Keep in mind that roughly a third of Australia’s shipments are sent to China so the imports component might have a stronger influence on the Aussie this time.
Analysts are expecting to see a larger surplus of 372 billion CNY compared to the earlier 343 billion CNY reading, likely spurred by stronger demand for “Made in China” goods which might then translate to higher demand for raw materials and commodities down the line. In any case, if you’re planning on basing your AUD bias on this report, don’t forget to review how the trade components turned out!
Whew! Quite a lot to watch out for, eh? If you’re not comfortable trading around all these potential event risks, it might be better to sit on the sidelines and watch price action unfold instead. Good luck!