G’day, forex mates! It’s gonna be a big week for the Aussie since there are FIVE major market events that could push the currency around. Better start prepping for these potential catalysts if you’re hoping to catch big moves:
1. Chinese PMI readings
- Official manufacturing PMI at 2:00 am GMT (49.9 expected, 49.8 previous)
- Official non-manu PMI at 2:00 am GMT (53.1 previous)
- Caixin manufacturing PMI at 2:45 am GMT (48.3 expected, 48.3 previous)
- Caixin services PMI at 2:45 am GMT (53.1 expected, 52.0 previous)
First up, we’ve got a bunch of November PMI releases from China on Tuesday’s Asian trading session.
Now if you’re wondering what these Chinese reports have to do with the Australian dollar, then you should remember that China is the world’s second-largest economy so its performance tends to have a strong impact on market risk sentiment.
Aside from that, China is Australia’s BFF in terms of international trade so improving data from China usually spurs strong demand for the Land Down Under’s raw material commodity exports.
Small PMI improvements are expected, which might be enough to keep the Aussie afloat against its forex peers.
2. RBA interest rate decision
- Interest rates to stay on hold at 2.00% for the nth time
- Less dovish bias expected?
Next, we’ve got the Reserve Bank of Australia’s (RBA) monetary policy statement lined up on Tuesday 3:30 pm GMT.No actual interest rate changes are expected, although Governor Stevens might reiterate the central bank’s shift to a less dovish stance.
Recall that their November interest rate decision and corresponding meeting minutes led to a prolonged forex rally for the Australian dollar when policymakers appeared to focus on the green shoots in the economy.
Not only did RBA officials brush off the external risks from the slowdown in China and emerging economies, but they also highlighted the positive developments in the labor market. If their December policy statement sounds upbeat again, the Aussie might be in for another forex leg higher.
3. Australia’s GDP report
- Australian Q3 GDP at 1:30 am GMT (0.7% expected, 0.2% previous)
If you’ve been paying attention in your Economics 101 class, then you probably remember that a country’s GDP or gross domestic product is basically its report card for the quarter.
This measures the change in the value of all goods and services produced during the period, with a positive figure indicating expansion and a negative reading showing contraction.
The Australian economy probably had a faster pace of growth at 0.7% in Q3 compared to the 0.2% uptick chalked up in Q2 this year. If so, the Australian dollar could make further headway against its forex peers as this would underscore the RBA’s upbeat rhetoric.
On the other hand, a huge disappointment could force the Aussie to retreat since that could bring rate cut expectations back on the table.
4. Australian trade balance
- Oct trade deficit to widen from 2.32B AUD to 2.61B AUD
Since the Australian economy relies heavily on its trade activity, the trade balance release also tends to have a strong impact on the currency. In particular, strengthening exports could be bullish for the Aussie while declining shipments could spur a bearish forex reaction.
Now the headline reading for the month of October is expected to show a larger shortfall compared to the previous month’s trade balance, but be sure to take a look at the underlying data before predicting where the Aussie might go next.
Keep in mind that a smaller deficit might not exactly be positive for the currency if it’s caused by large declines in both imports and exports.
5. Australian retail sales
- October retail sales to show another 0.4% uptick?
Rounding up the week for the Australian dollar is the Land Down Under’s retail sales report, which might show another 0.4% uptick in October.
Just like trade activity, consumer spending also contributes a huge chunk to Australia’s overall economic growth so strong data could yield forex gains for the Aussie.Recall that jobs figures turned out overwhelmingly positive for the same month, which suggests that Aussies were probably feeling extra confident about their financial outlook then.
This kind of optimism usually translates to increased spending activity, particularly on big-ticket items such as furniture and automobiles, which could boost retail sales numbers.
Whew! Quite a lot comin’ up, huh? If you’re not comfortable trading during these potential event risks, there’s no shame in sitting on the sidelines or making the necessary adjustments to limit your exposure to your forex positions.
But if additional volatility is your cup of tea, just don’t forget to practice proper risk management at all times. Good luck!