Daily Economic Commentary: Australia

[PipDiddy]

Surf’s up, Aussie bears! Despite an upside surprise in China’s leading index, the Aussie crashed and burned against the Greenback yesterday. AUD/USD fell from its 1.0463 intraday high and only managed to cut its losses at 1.0385. Yeouch!

Though there were no economic reports released from the Land Down Under, the Aussie wasn’t immune to the risk aversion that clouded over the markets yesterday. The Aussie bulls even ignored an upside surprise in China’s CB leading index, which clocked in at 1.7% against its 0.6% growth in July.

There are no reports scheduled from Australia today, so the Aussie will most likely trade on risk sentiment and appetite for commodity-related dollars. Keep your eyes glued to the tube for news from the euro zone or any other reports that might impact the high-yielding currencies!

[PipDiddy]

Make that three! AUD/USD extended its losing streak for the third day in a row as it closed at 1.0360, 25 pips down from its 1.0380 day open price. AUD/JPY had its share of losses as it ended the day at 80.52. Will the Aussie keep losing today or does it have a chance to rebound?

Since Australia didn't release any economic figures yesterday, the Aussie was left vulnerable to risk sentiment. Unfortunately for the higher-yielding Aussie, U.S. economic data came in weaker than expected yesterday and this was enough to keep risk aversion in the markets.

There are no reports due from the Land Down Under today, which means that risk sentiment could still be at the helm. Bear in mind that the U.S. has a few red flags on tap while euro zone is waiting on Spain's budget release and, if these events turn out worse than expected, we might see another Aussie selloff. Stay on your toes!

[PipDiddy]

The forex gods smiled upon the Aussie yesterday as demand for the high-yielding currency was strong and healthy. Within 24 hours, it was able to undo almost 3 whole days' worth of losses as AUD/USD climbed 84 pips to end at 1.0444.

Yesterday's action was all about risk appetite! Not only did risk sentiment improve thanks to Spain's budget plans for 2013, but China's announcement to increase the supply of money also helped boost the market's courage and confidence to take on riskier assets.

To end the quarter, Australia will be publishing private sector credit data, which is slated to show a 0.3% increase in new credit issued to consumers and businesses, up from 0.2% the previous month. But to be honest, this report doesn't really have a history of rocking the markets, so Aussie price action will probably still be heavily dictated by risk sentiment.

[PipDiddy]

Timberrrr! The Australian dollar's recent gains were chopped off last Friday as AUD/USD tumbled from the 1.0450 mark to close at 1.0373. AUD/JPY had its share of losses as the pair closed 6 pips shy of the 81.00 handle. Let's find out of the Aussie has a chance to bounce back today.

Weaker than expected Australian private sector credit may have been one of the reasons for the Aussie selloff last Friday as the report posted a mere 0.2% uptick for August instead of the estimated 0.3% increase. Another factor that could've pushed the Aussie lower against the Greenback was profit-taking at the end of the month and quarter.

Over the weekend, China released a couple of manufacturing PMIs which revealed that the industry was still in a slump. HSBC's final manufacturing PMI was revised slightly higher from 47.8 to 47.9, which this still indicates a contraction in manufacturing, while the official manufacturing PMI came in a notch lower than the consensus at 49.9. Since China is Australia's number one buyer of raw materials, the downturn in manufacturing would be negative for the Land Down Under's economy, which means that the Aussie selloff could carry on.

Earlier today, Australia also released a weak report as its AIG manufacturing index reported a contraction in the sector. The reading dipped from 45.3 to 44.1 in September, and this could be another factor that might drag the Aussie down for the rest of the day unless risk appetite picks up.

[PipDiddy]

The Aussie held the Greenback to a stalemate as AUD/USD hardly budged from its opening price. The pair started off by drifting to a low of 1.0326, then climbed to 1.0404 before settling back down at 1.0368, just 5 pips above its opening price.

It seems the markets just couldn't decide where to take the Aussie yesterday, but maybe they'll change their minds after the RBA rate decision scheduled later today, eh?

The central bank isn't really expected to change interest rates, but there are a few out there who believe there's a tiny chance that we may see a rate cut from 3.50% to 3.25%. It's true that the threat of a slowdown in China is sort of wearing on Australia's growth prospects, but recent reports from Australia haven't been too alarming, leading many to believe that there's no need for the RBA to rush into a rate cut.

That being said, if the RBA does decide to slash rates, it would come as a bit of a surprise and would probably lead to a big sell-off. In any case, be ready for anything when the central bank finally makes its big decision at 4:30 am GMT!

[PipDiddy]

Geronimoooooooo!!! Just when we thought that we got the RBA all figured out, it pulled a fast one on the markets and surprisingly cut its interest rates. As a result, AUD/USD performed a fantastic dive to the tune of 107 pips all the way to 1.0261. What the heck prompted the rate cut?

As Forex Gump mentioned a couple of hours ago, the RBA cited the underperformance of the Chinese economy as well as threats of the weaknesses in the euro zone and the U.S. economies as its main reasons for the cut. And then there’s also the stubbornly high Australian dollar, which is weighing on the country’s exports. With no inflationary pressures to hike its rates, it was an easy decision for the RBA to go ahead and surprise the markets.

Will the Aussie bulls get any reprieve today? Australia’s economic data won’t be any help as the reports released a couple of minutes ago showed further weaknesses. The HIA new home sales fell to a 15-year low in August, supporting the RBA’s need to cut its rates. Meanwhile, Australia’s trade balance showed a deficit of 2.03 billion AUD in August, which is more than the 1.53 billion AUD deficit that we saw in July.

No other reports are scheduled for release from the Land Down Under, so keep your AUD trades on close watch in case we see news that might affect risk appetite!

[PipDiddy]

The Aussie continued its sharp slide down the charts as Australian trade balance data failed to give the currency a boost. After opening at 1.0261, AUD/USD headed straight down the charts to consolidate just above the 1.0200 handle. It eventually settled at 1.0204 at the end of the day.

Australia's trade balance report pretty much set the tone for the Aussie - it was utterly disappointing! Once again, Australia's trade balance slipped back into negative territory to record its seventh deficit of the year.

Analysts had expected the deficit to narrow from 1.53 billion to 0.69 billion AUD in August, but instead they were blindsided as the deficit surprisingly grew to 2.03 billion AUD. Both imports and exports dropped in August, but the rate at which exports fell outpaced the decrease in imports. It was noted that the biggest drag was a drop in demand for coal, which accounts for about 10% of Australia's exports.

This morning we've got more numbers coming our way as Australia is set to publish building approvals and retail sales data for the month of August. Look for building approvals to show a 4.8% increase and retail sales to post a growth of 0.5%. Don't even think of missing these reports when they come out at 1:30 am GMT, because if they deliver upside surprises, it might help the Aussie erase some of its recent losses.

[PipDiddy]

Finally, a breather! Thanks to risk appetite in the markets, the Aussie traders were able to shrug off the mixed economic reports from Australia. AUD/USD dropped to an intraday low of 1.0182 before it closed 39 pips higher than its open price. Phew!

Australia’s mixed economic reports did the Aussie little favor during the Asian session. Though building approvals in Australia rose by 6.4% in August after dropping by 21.2% in July, the retail sales figures showed only a 0.2% increase. That’s not even enough to cover the 0.8% decrease in July!

The Land Down Under isn’t scheduled to publish anything today, so keep an eye out for any reports that might affect the demand for high-yielding comdolls like the Aussie. The U.S. NFP report at 12:30 pm GMT is a good start since it usually inspires volatility in the U.S. session. Read the rest of my currency updates to see if you can trade other economic reports!

[PipDiddy]

After consolidating briefly above the 1.0250 minor psychological support during the Asian and London sessions, AUD/USD dropped like a rock during the release of the NFP figure during the U.S. session. The pair dipped to a low of 1.0152 before it closed at 1.0169.

There were no reports released from Australia last Friday, leaving AUD/USD at the mercy of risk sentiment and U.S. economic data. Unfortunately for the Aussie, the Greenback reigned supreme during the NFP release, which turned out much better than expected. For more details on the U.S. NFP, check out my U.S. economic commentary!

On Tuesday, Australia will release its NAB business confidence figure for September. Recall that the reading dipped to -2 in August, which reflects worsening business conditions, but a rebound to the positive territory could provide a boost for the Aussie.

On Thursday, Australian jobs data are due at 12:30 am GMT and the figures are expected to show a rise in net hiring. Despite this, Australia’s jobless rate is expected to climb from 5.1% to 5.3% for September.

There are no other top-tier reports due from Australia for the rest of the week but make sure you keep close tabs on Chinese data as well. Note that China will print its new loans data on Wednesday and its trade balance on Saturday. Good luck trading out there!

[PipDiddy]

What better way to start the week than by closing in the green! Just like their comdoll siblings, the Aussie bulls came out in force yesterday, as they trampled all over the markets, as AUD/USD rose 37 pips to close at 1.0234.

Earlier today, the NAB business confidence index was released and printed flat, as it came home with a score of 0. Still, this was better than the downwardly revised reading of -3 we saw the month before. This just means that Australian business managers haven’t changed their outlook on the future of the economy and remain as cautious as ever.

Late today 11:30 pm GMT, the Westpac consumer sentiment index will be released. The index printed at 98.2 last month, so if we see a score higher than this at this month’s release, it could provide the Aussie bulls more fuel to keep charging forward.

Aside from that, no biggies lined up, but do take note that U.S. traders will be back from the holidays and that European finance ministers will be meeting today. This could trigger lead to more volatility in the markets, so watch out!