Daily Economic Commentary: Australia

[PipDiddy]

The Aussie's rally was short-lived yesterday since it was unable to hold on to its latest gains. The AUDUSD climbed to a high of 0.9141 before dropping back below the 0.9100 handle during the US session.

The RBA financial stability review, which was released yesterday, revealed that the central bank believes that the recent rise in poorly performing commercial property loans needs close monitoring. Apart from that, the review confirmed that everything is still A-okay with the Australian economy. RBA Governor Glen Stevens echoed this optimistic sentiment in his speech yesterday. He also mentioned that large economies, such as the US and the UK, need to reduce spending while Asian economies could spend more and allow their currencies to appreciate. Hmm, this rhetoric sounds familiar... Well, that's the ongoing argument for global trade and currency rebalancing!

The only economic report released from Australia was its CB leading index, which printed a 0.2% decline for January, following the 0.6% rise seen in December. This forced the Aussie to cough up some of its profits during the day.

Australia won't be releasing any economic reports today so watch out for economic reports from other nations, particularly the US, which will release its final GDP and University of Michigan consumer sentiment report. Also keep an eye out for developments concerning the Greek debt situation, which could cause wild swings in risk sentiment!

[PipDiddy]

The Aussie lost again versus the greenback in last Friday’s trading. The AUDUSD fell to and settled at 0.9041 from 0.9074. Can the Aussie get back on its feet and win against the dollar this week? Perhaps.

Earlier today, Australia’s HIA new home sales were issued. The account unexpectedly slipped by 5.2% after logging in a 9.2% win during the previous month. Data on new home sales is used as one of the indicators of a country’s domestic consumption. A slide in this account is usually bearish for the currency. The Aussie, however, still moved higher despite the drop in sales.

On Wednesday, Australia’s retail sales, building approvals, and private sector lending for the month of February will be on deck. Building approvals is seen to have gained by 2.0% after sinking by 7.0% in January. Retail sales are also projected to have expanded again by 0.3% following a 1.2% jump in the month prior while Australia’s private sector lending is estimated to have logged in an increase of 0.4%. Positive results in these accounts could send the Aussie higher.

On Thursday, Australia’s trade balance figure will be published. The country’s trade deficit probably widened to –A$1.37 billion in February from –A$1.18 billion. Australia’s economy is highly dependent on its exports. Therefore, a dip here could reflect negatively on the economy and the Aussie.

[PipDiddy]

Thanks to some unexpected hawkish comments from RBA Governor Glenn Stevens, the Aussie was able to stage a stellar rally in yesterday's trading session. The AUDUSD found itself at 0.9177 by the end of the US trading session, almost 150 pips higher from its week open price.

In an interview on the TV show Sunshine, Stevens commented that house prices in Australia are starting to rise to unwanted levels. This gave currency traders a chance to speculate that the bank would hike rates again. He even went on to say that keeping interest rates low for long periods and then suddenly hiking them isn't really helpful to anyone.

For today, we've got the building approvals and the retail sales report at 12:30 am GMT.

The building approvals report, which measures the monthly increase (or decrease) of new building approvals issued by the government, is expected to show a rise of 2.1% in February, opposite the huge 7.0% decline seen the month before.

As for the retail sales report, the expectation is a minor increase of 0.3% for February, a fourth of the gain experienced in January. Since consumer spending makes up more than 70% of a country's GDP, rising retail sales is generally seen as a leading indicator of economic growth. Better-than-expected results tend to cause an immediate rally in the Aussie.

[PipDiddy]

Aussie bulls continued to push the AUDUSD higher yesterday, before giving up some of those gains when the US session rolled around. After hitting as high as 0.9216, the pair finished trading at 0.9182.

Earlier today, retail sales and building approvals data were released, and unfortunately for those Aussie bulls, they came in worse than expected. Retail sales dropped by 1.4% in January, after it was projected to have shown growth of 0.3%. Meanwhile, building approvals fell by 3.3%, opposite the 2.1% expected increase.

These results came a day after some hawkish comments from RBA Governor Glenn Stevens. Will this cause the RBA to think twice before raising rates once again next month?

Later tonight at 11:30 pm GMT, the Melbourne Institute will be releasing its inflation report. Last month, the report showed a mere increase of 0.1% in inflation. If inflation continues to rise, it would just give more reason for the RBA to keep raising interest rates.

An hour later at 12:30 am GMT, trade balance figures are on deck. Estimates are for a deficit of 1.37 billion AUD. If the results come in worse than expected, it may signal that Australian exports are still struggling.

[PipDiddy]

Wipe out! The Aussie took a nasty fall during the early Asian session after weak retail sales and building approvals reports were released from Australia. Still, the AUDUSD fought to keep its head above the 0.9150 level while the AUDJPY grabbed onto the 85.75 handle.

Later on, Australia released another bleak economic report in the form of the AIG manufacturing index. The reading dipped from 53.8 to 50.2 in March, signalling that the expansion in the manufacturing industry slowed down during the month. Although the index remains above the 50.0 mark, the fall was caused by the decrease in orders for consumer goods.

On top of that, Australia's trade deficit worsened in February as it widened from 1.12 billion AUD to 1.92 billion AUD. Trouble in their export industry, perhaps?

On a more upbeat note, the MI inflation gauge rose from 0.1% to 0.5% in March, putting pressure on the RBA to implement another rate hike soon. Stay on your toes during the next RBA rate decision on April 6!

Up ahead, the commodity prices report is set for release at 5:30 am GMT today. Prices of commodities have long been dropping but at a decreasing pace. In February, commodity prices fell by an annualized 9.7%. A smaller decline could be bullish for the commodity-dependent Australia and could provide a bit of support for the Aussie.

No other economic reports are due from Australia later on but that doesn't mean the price action would be calm for the rest of the week! Keep an eye out for the release of the US non-farm payrolls report on Friday since this could make some wild waves in the markets!

[PipDiddy]

The Aussie extended its run vis-à-vis the yen last Friday to five. The AUDJPY rose to and closed at 86.91 from 86.41 and also marked a new 6-month high at 87.09. Will the Aussie be able to continue its strong move upward? Maybe.

Commodity prices in Australia rose by 1.4% in March after slipping by 7.0% in February. Remember that commodities take a huge chunk of Australia’s export industry. This rise therefore helped boost Australia’s export income for that same period. The AUD also got some support following the report.

The week will kick off for Australia with the release of the ANZ job advertisements for the month of March on Tuesday. February’s number shows a jump of 19.1% in ads. Job advertisements indicate the availability of work in Australia. For that reason, an increase here would reflect positively on the country’s labor market and the AUD.

However, Tuesday's focus will be on the RBA’s interest rate decision. The RBA now is expected to raise its interest rate again by 0.25% to 4.25%. The drop in Australia’s February building approvals and retail sales could factor in the bank’s decision not to do so. The AUD would probably lose some support if the RBA does not raise its rate at least as projected.

AIG’s performance of service index will also be issued late on Tuesday. The index logged a score of 48.3 in February. For March, it would be a good news for Australia’s service sector if it tallied a score better than 50.0, indicating an expansion.

On Thursday, Australia’s March employment change and unemployment rate will be due. Firms in Australia are seen to have added another 20,200 jobs in March on top of the 400 that they hired in February. The country’s unemployment rate, though, is still expected to remain the same at 5.3%. Nonetheless, a jump in employment could push the Aussie higher.

[PipDiddy]

Due to the lack of economic news, the AUDUSD found itself dazed and confused yesterday, unable to find direction. The AUDUSD just bounced around a tight 40-pip range and closed the day hardly changed at 0.9212.

No data was released yesterday but earlier today, the Australia and New Zealand Banking group released its report on job advertisements. It showed a rise of 1.8% for the month of March, a significant drop from the 19.1% increase seen in February. The sharp drop in advertisements pushed the AUDUSD down below the previous day's low.

At 4:30 am GMT today, all ears will be on the Reserve Bank of Australia as they are set to announce their decision on interest rates. They are expected to do a 25 basis point hike. If forecast holds, we could see the bulls take the AUDUSD to this month's high at the 0.9220 region again. If you want the 411 on the event, head on over to Forex Gump's blog. He wrote a nice article on the event, detailing possible scenarios and their corresponding effects.

[PipDiddy]

Booyeah! Aussie bulls went on a buying spree yesterday, after the RBA decided to hike rates to 4.25%. After touching as low as 0.9165 zoomed all the way up to close at 0.9283. Talk about an Aussie-some performance!!!

One reason why traders reacted strongly to the Reserve Bank of Australia's rate decision is that there was some speculation that the bank would actually pause on increasing interest rates this month. Well, so much for that! The RBA took a more positive stance on its economic outlook, pointing to better employment and credit conditions, as well as improvements in the housing market. They even said that the decision was just another step towards bringing interest rates back to normal levels!

Pretty optimistic eh?

No reports are on deck today, so we probably won't see as strong a move as we saw yesterday. Watch out tomorrow though, as unemployment data is due at 1:30 am GMT. An additional 20, 200 jobs are expected to have been added to the economy. If the release beats consensus, it could lead to another run of AUD buying by Aussie bulls.

[PipDiddy]

After surging above the 0.9250 mark during the Asian session, the AUDUSD traded quietly within a 50-pip range for the rest of the day. The AUDJPY, on the other hand, erased some of its recent gains and fell back below the 87.00 handle.

Australia didn't release any economic reports yesterday, making it difficult for the Aussie to pick up pace in its latest rally. Risk aversion, spurred by US Fed Chairman Ben Bernanke's downbeat comments, gave the safe-haven greenback a fighting chance against the higher-yielding Aussie.

Australia is set to release its employment report early today. The report, which is due 1:30 am GMT, could print a 20.1K increase in employment for the month of March. If the actual figure meets the consensus, it would be a much higher than the 0.4K increase in employment seen in February. Although Australia's unemployment rate is expected to hold steady at 5.3%, a strong employment report could give the Aussie enough energy to bust out of consolidation with the greenback.

[PipDiddy]

The Aussie closed mixed yesterday against the yen and dollar. The AUDJPY closed at 86.63 after touching a low of 85.70 from 86.58. Similarly, the AUDUSD settled at 0.9280 after finding itself at a low of 0.9222 from 0.9278.

Yesterday, Australia issued its employment report. The report showed that firms in Australia added about 19,600 jobs in March which was slightly below the projected 20,100. The previous month’s employment change was also revised down to -4,700 from 400. The country’s jobless rate, on the other hand, remained at 5.3%. In any case, the less-than-stellar March employment change plus the downward revision on the month prior’s number caused the AUD to lose some support.

No economic reports are due today in Australia and in the US. Therefore, the AUD could just trade in a range-bound fashion given the lack of economic flows.