Daily Economic Commentary: Australia

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After its impressive two-week rally, the AUD paused to catch its breath last Friday as it ended lower against the USD. That day, the AUDUSD pair hit a new yearly high of 0.9271 before taking a sharp dive and reaching an intraday low of 0.9124.

Would the AUD resume its rally this week? Only a few economic reports are scheduled to be released but the RBA's monetary policy meeting minutes due on Tuesday could set the tone for AUD trading for the rest of the week. The minutes of the meeting could highlight the strong performance of and the bullish outlook for the Australian economy and could also hint at another interest rate hike in their next rate statement.

Today, RBA Assistant Governor Philip Lowe is scheduled to deliver a speech entitled "The Growth of Asia and Its Implications on Australia" at the Citigroup Australian Investment Conference. A positive outlook for the Asian region translates to an upbeat sentiment for Australia, which would pump up the AUD.

Later this week, the Melbourne Institute will be releasing its leading index of indicators. The index rose by 1.1% last month and is expected to continue its uptrend, given the latest set of strong economic data. Data on import prices, which is expected to print another decline, is also due this week.

Economic reports from China should also have an impact on AUD trading, since China has a major influence on the Australian economy. Chinese GDP, which is expected to rise by 9.0% for the third quarter, is due Thursday 2:00 am GMT. China's industrial production reading is also due then. After rising by an impressive 12.3% last August, industrial production in this Asian giant is projected to surge by 13.3% in September.

[ForexGump]

The Aussie continued its streak against the greenback and the yen as it managed to register new yearly highs yet again. The AUDUSD reached 0.9286 before closing at 0.9279. Similarly, the AUDJPY pair rose to a high of 84.17 before closing at 84.06.

Yesterday, RBA Assistant Governor Dr. Philip Lowe issued a speech titled "The Growth of Asia and Some Implications for Australia" at the Citigroup Australian Investment Conference, in Sydney. In his speech, he mentioned that Australia would benefit from rising demand for raw materials like iron ore and coal from the Asian economies. Note that China’s third quarter GDP and y/y industrial production, which are going to be released on October 21, are seen to post some notable growth. China is one of the biggest economies in the world. Hence, any growth in any of the two mentioned accounts could indicate growing demand for Australia’s export products. Such could then keep the AUD higher against the dollar.

Earlier today, the RBA had its MPC meeting minutes. Remember that the central bank hiked its interest rate from 3.00% to 3.25%. In its minutes, the bank reasoned that keeping the rate could speed up future inflation and cause economic “imbalances.” Hence, a raise in borrowing costs is warranted given also that current inflation is already above the bank’s target.

No other economic reports are due today in Australia. In the mean time, Yahoo is scheduled to publish its third quarter earnings report during the US session. Encouraging profits could once again spark risk appetite which could benefit the higher yielding assets such as the AUD.

[ForexGump]

The Aussie, just like the other comdolls, fell against the dollar when risk aversion hit the markets yesterday. Apparently, the gloomy data from that came out of the US overshadowed better-than-expected earnings from top companies like Texas Instruments and Apple.

Australia’s leading index just released rose once again by 1.1% in August. The index, which is designed to determine where Australia’s economy is headed, didn’t have much impact though as most of the data used to come up with the final result have been previously released.

No economic data today but expect to see Australia’s report on import prices for the third quarter of 2009 on Friday.

[ForexGump]

The AUDUSD lost some cool yesterday after setting a new yearly high at 0.9328. The decline in risk appetite during the latter part of the US session did not bode well for Aussie and the pair lost much of its gains to close at 0.9259.

No data from Australia is scheduled for release today, although Chinese GDP was being released as I was writing this. I’ll update you on whether that report caused a ruckus in the markets or not.

Tomorrow, we’ve got the import prices report coming out at 12:30 am GMT.

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With China, Australia's major trade partner, posting an amazing 8.9% economic growth, you'd think that the AUD would shoot all the way up... Instead, the AUDUSD fell to 0.9200 and the AUDJPY dropped to 84.00 as traders focused on the fact that Chinese GDP failed to meet the consensus of 9.1% growth.

If you think that China's 8.9% GDP growth is already impressive, you should check out their other economic indicators. Their industrial production was up by a whopping 13.9% from the previous year, beating the forecast of a 13.3% increase and the earlier month's 12.3% rise. Fixed asset investment surged by 33.3%, which was roughly in line with the consensus of a 33.1% increase. Its CPI was down by 0.8% while PPI fell by 7.0% just as expected. Despite these upbeat reports, traders grew concerned about the sustainability of China's growth when the hundred billions of dollars in government stimulus is withdrawn. The result? A drop in Asian equities and a sharp dive by both the AUD and NZD.

Fortunately, the AUDUSD was able to rebound during the US session as traders took the opportunity to go long when the pair dipped to the 0.9200 handle. It sprinted all the way to 0.9300 and closed at 0.9274.

Would the AUDUSD be able to hold on to its gains until the end of the week? Australia's economic calendar is not as busy, with only data on import prices on tap. This report, which was just released a few moments ago, showed that import prices fell by 3.0% in the third quarter.

Keep an eye out for the release of US existing home sales at 2:00 pm GMT. If the actual data comes in better than the consensus of 5.37 million home sales, then we might see a run of risk appetite which would boost the AUDUSD. Also, earnings reports from several US companies such as Microsoft are due today. Watch out for sudden changes in sentiment!

[ForexGump]

The Aussie closed mixed against the two safe-haven currncies – the USD and the JPY. The AUD followed up on its uptrend over the yen as it went as high as 85.33 before closing at 84.91. It, however, closed negatively against the greenback. The AUDUSD pair fell to as low as 0.9200 before closing at 0.9222.

No major economic reports were publised in Australia last Friday. The positive results of the US existing home sales did not do much to influence risk appetite either. The capitals markets were buoyed by strong corporate earnings in the US for the most part of the week . Investors and traders probably booked their profits to close the week which caused an overall selling in the equities markets. This consequently brought down the high yielders in favor of the USD.

Austrlia’s PPI for the third quarter was just released earlier today. The country’s PPI, which is used to gauge inflation, rose to 0.1% from last period’s -0.8% reading. The latest score, however, is below the consensus of 0.3%. Despite this, the AUD still rallied against the JPY and the USD.

On October 28, Australia’s CPI for the third quarter will be reported as well. Inflation is seen to rise to 0.9% from 0.5%. The result, though, could come in below the initial projection given the latest PPI reading.

Lastly, Australia’s CB leading index in August will be published on October 29. The index is composed of of 7 economic indicators that take into account money supply, building approvals, corporate earnings, exports, inventories, and spreads on interest rates. The account is used to gauge the economy's direction in the foreseeable future. With July’s tally already pegged at 0.7%, any further increase from the previous score could reflect positively on Australia’s economy and the AUD.

[ForexGump]

As usual, the AUD/USD pair took a queue from the drop in gold prices and gave back some of its gains from last week yesterday. The pair attempted to rally early during the Asian session but the move fizzled out and the pair eventually found itself back in the 0.9150 region. It seems that the next logical step for the AUD/USD bears is to take the pair to 0.9113, last week’s lowest price level.

The National Australia Bank’s business confidence survey for third quarter 2009 just released surged to 16 from -4 the previous quarter. This is the first positive number in six months, indicating that business conditions are improving and adding more evidence the Australia’s economy is indeed better placed than its western counterparts.

Australia’s economic cupboard will remain empty for the rest of the day but expect to see the country’s Consumer Price Index tomorrow at 12:30 am GMT. Economists predict that the average price of goods and services increased by 0.9% during the third quarter of 2009 as consumer spending picks up. If forecast holds or comes out higher than expected, it would mark the third consecutive quarter of price increases and could provide a reason for investors to buy up the AUD.

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Indecisive movement for the Aussie, as risk aversion and risk appetite continued to duke it out. The AUDUSD pair closed the day at 0.9166, just 4 pips from its opening price.

Early today, the CPI q/q report was released. The report showed that consumer prices rose by 1.0% in the past quarter after it was expected that prices would rise by only 0.5%. Given that inflation is slowly picking up, it may give the Reserve Bank of Australia more reason to raise rates further next week. It is expected that the RBA will raise the rate by another 0.25% next week, bringing the rate up to 3.25%.

Tonight, look out for the CB leading index, which is scheduled for release at 11:00 pm GMT. While the report is not normally a high impact report, if it does come in to show a nice surprise, it may provide some support for the slumping Aussie.

[ForexGump]

Ouch! The AUDUSD crashed all the way down to a low of 0.8962 as weak economic reports from the US called for risk aversion. Although the AUD was able to benefit from a strong headline CPI, it was unable to hold on to its gains as it gave way to the safe-haven USD.

Consumer prices posted a 1% quarterly increase, which was higher than the consensus of a 0.9% uptick. However, the annualized CPI reading slowed to 1.3%, which is its slowest increase in almost 10 years. This gave rise to speculations that the RBA might pause its rate hikes in their next monetary policy meeting.

Later on, Australia reported a 1.8% rise in its leading index of economic indicators for August. The improvement in building approvals and rally in stocks contributed much to the advancement in the leading index, which has been steadily climbing since June this year. Still, the AUDUSD was unable to recover from being heavily clobbered by risk aversion.

Today, Australia will release its new home sales report. New home sales were up by a whopping 11.4% in August after seeing marginal improvements in June and July. If the report prints another strong figure for September, then the AUD might recover some of yesterday's losses.

Watch out for the release of the US third quarter GDP reading later today. This report could cause quite a ruckus in the markets, especially if it beats the highly optimistic consensus. Economic growth in the US is expected to be at 3.2% in the third quarter after seeing a 0.7% contraction in the previous quarter. The actual figure is due 12:30 pm GMT and, if you are not a big fan of volatility, you might want to stay on the sidelines then!

[ForexGump]

The Aussie made a sharp “V” turn against the USD and the JPY yesterday after the US showed that its economy have grown by 3.5% during the third quarter. The AUDUSD went to as high as 0.9182 before closing at 0.9150. The AUDJPY also soared to 84.06 but closed a little lower at 83.64.

Australia’s HIA new home sales in September suddenly fell by 4.5% after posting an 11.4% gain during the previous month. The report, however, had a somewhat muted effect on the AUD.

Later in the day, a report showed that the US was able to get out of the rut for the first time this year. It even surprised everybody when it printed a 3.5% expansion during the quarter, better than the 3.2% initial projection. Much of the economy’s gain, though, could be attributed to the government and Fed’s stimulus programs. In any case, the stellar figures sparked another run for risk appetite which reflected positively on the higher yielding assets like the AUD.

Earlier today, Australia’s private sector credit for the month of September was published. The account measures the change in the total value of new credit issued to consumers and businesses. To the dismay of some, the account fell dropped by 0.2% during the month after gaining by the same rate in the month prior. A dip in the figure suggests that spending at least in the period covered may have declined as well.

The Aussie lost a little bit of support following the report.

No other economic reports are due in Australia today. The US, on the other hand, is slated to issue its core PCE index, Chicago PMI and personal and income spending. Positive results could support yesterday’s rally which would be beneficial for the AUD.