Daily Economic Commentary: Australia

For the second day in a row, the Aussie failed to find direction in the currency markets. The AUDUSD closed the US session at 0.9151, just two pips higher from its Asian open price. Similarly, the AUDJPY ended the day hardly changed at 82.85.

It seems like the worse-than-expected results on the country’s employment situation report won’t be enough to keep the Aussie down for long. After dropping early on during the Asian session, the Aussie managed to retrace all of its losses once the European trading session went underway. Could this be the work of the Aussie’s yield advantage? Remember, interest rates in Australia one of the highest among the major economies, making it a prime candidate for carry trade.

No economic data coming out of Australia again today so the Aussie’s price action would most likely be driven by the news coming out of other major economies, particularly the US retail sales report later at 1:30 pm GMT!

The Australian dollar posted its 6th straight day of gains versus the dollar, as the AUDUSD closed the week at 0.9156. However, buying momentum seems to have slowed down, as the pair has failed to make new significant highs. What could be in store for us this week?

We may see some tentative trading for the better part of this week, as not much high impact news is on deck this week from Australia. Just watch out for the minutes of the latest RBA meeting due tomorrow at 12:30 pm GMT. It will contain information regarding the RBA’s decision to hike interest rates earlier this month. Perhaps it’ll drop some clues on whether or not they will continue to hike rates in coming months as well.

Aside from that, be on the lookout for shifts in risk sentiment. Risk appetite came back last week to give higher yielding currencies a boost, but the skeptic in me thinks that this might just be the dollar bulls taking a breather. Also, keep an eye out on commodities trading – if gold continues to rise, it could provide fuel for AUD bulls to keep on going.

The com-doll gang was single-handedly overpowered by the greenback in yesterday’s trading, causing the AUDUSD to crash to a low of 0.9096. Australia didn’t release any economic reports in the past 24 hours but let’s find out whether today’s data could provide support for the AUD.

Today, the RBA is set to release the minutes of their latest monetary policy meeting, during which they hiked their rates by another 0.25%. Bullish comments from the central bank officials could help keep the AUD afloat but traders are probably more interested to know whether the RBA would conduct more hawkish moves in the near term. The AUD might have a tough time making headway if the RBA minutes hint that the central bank could take another hiatus from its tightening policies.

At 11:30 pm GMT, the Melbourne Institute will release its leading index for January. Recall that this index of economic indicators climbed by 0.5% in December. Another uptick could boost the AUD.

Be on the lookout for the FOMC statement also due today. Hawkish comments from Fed officials could send the greenback soaring as traders expect that rate hikes could take place soon. In particular, plenty are itching to find out whether rates will still stay low for an “extended period”. Stay tuned at 6:15 pm GMT to find out!

The Aussie was able to regain all of its losses against the greenback yesterday. The AUDUSD rebounded to close at 0.9185 from 0.9147.

The RBA, in its monetary policy meeting minutes, stated that it is leaving its options open for its next board meeting on April 6. Remember that the central bank has recently raised its interest rate again by 0.25% to 4.00%. Now, it will probably wait and see the effects of their latest move before either keeping the rate steady again or hiking it.

Meanwhile, the Westpac leading index rose by 0.2% to 255.7 which is its highest level since August 2008. The increase in the index, while predicting a positive swing for the Australian economy, however, failed to give the Aussie some support.

RBA Assistant Governor Dr. Guy Debelle is set to participate shortly (2:00 am GMT) in a panel discussion at the MFAA Industry Leaders Luncheon, in Melbourne. Traders could look for some clues regarding the bank’s future policy shift in his statements since he is one of the advisers of the Reserve Bank Board that decides on the bank’s monetary policies. Any hawkish statement could give the Aussie some support.

It appears that the third times the charm for the Aussie as it was finally able to bust through the 0.9200 handle yesterday. The AUDUSD managed to climb as high as 0.9252 before deciding to settle at 0.9236 at the end of the US trading session.

The currency traded mostly higher yesterday because of the Fed’s decision to retain its stance of keeping monetary policy steady for an extended period of time. This implied that interest rates they could keep rates very low all the way into 2011, giving traders more hold on to their AUDUSD carry trade positions.

No economic news will be coming out of Australia today but it doesn’t mean that volatility will also be absent! The US consumer price index, the Philadelphia manufacturing index and the weekly unemployment claims that will be released later could determine whether the falling trend line on the daily chart pointed out by Big Pippin would hold or not.

An uneventful day from Australia left the AUDUSD within range, although the pair did close slightly lower at 0.9208. With the week coming to a close, could we see some profit taking take place today?

I took a look at the [=&currency[]=AUD&currency[]=CAD&currency[]=CHF&currency[]=EUR&currency[]=GBP&currency[]=JPY&currency[]=NZD&currency[]=USD&importance[]=&importance[]=3&importance[]=2&importance[]=1&display=daily"]BabyPips.com Economic Calender](http://www.babypips.com/tools/forex-calendar/?date=1268974800&&timezone=8&currency[) and… I didn’t see anything! What I mean is, there isn’t any high impact data coming out from Australia or the US. We may see more range like movement today. Still, I caution you to keep an eye out for the usual culprits that could affect AUD trading, such as commodity trading, as well as any news from Europe regarding the Greece issue.

The Aussie fell victim to greenback strength last Friday, with heightened risk aversion pushing the AUDUSD to the 0.9150 area. Conflicts surrounding the Greek debt saga forced most higher-yielders to return their recent gains, pulling the AUDUSD down from its fresh two-month highs.

Australia’s newly released motor vehicle sales report printed a 1.9% decline for February, following January’s staggering 3.5% drop. Could this be a sign of faltering consumer confidence in the Land Down Under?

Apart from their CB leading index due Thursday 11:00 pm GMT, no other economic reports are due from Australia from the rest of the week. The leading index printed a humble 0.6% climb in December and could report another uptick for January. Keep an eye out for a couple of speeches from RBA officials, namely Assistant Governor Philip Lowe and Governor Glenn Stevens who are set to speak on Wednesday and Thursday respectively. Hawkish comments concerning Australia’s future monetary policy could provide support for the Aussie this week.

The Aussie was able to rally late during yesterday’s game to pare off its losses and even edge the greenback. After hitting a low of 0.9085, the AUDUSD rebounded to close higher at 0.9183 from 0.9155.

The drop in the gold prices earlier during the day weighed heavily on the Aussie. Remember that Australia is one of the biggest producers of gold in the world, giving the Aussie an 80% correlation with the price of gold. Gold fell to $1092.10 per ounce but eventually rallied to close at $1099.50 per ounce. The Aussie rebounded along with it.

No economic reports are due in Australia today. The Aussie, however, could experience some volatility when the US’s February existing home sales are released later at 2:00 pm GMT. The account is expected to print 5.01 million sales in February on top of the 5.05 million during the month prior. A strong figure here could spark some risk taking, benefiting the higher yielding assets like the AUD.

The AUDUSD was directionless in yesterday’s trading session. Although it fell early on during the Asian trading session, the AUDUSD was able to pare its losses once the US trading session rolled along. The pair ended the day at 0.9188, just five pips higher from its open price that day.

Tomorrow, Australia’s CB leading index for January will come out. The CB leading index, which is a composite index of seven economic indicators (some previously released), tries to predict the direction of the economy. A rising reading means that the economic conditions are improving while a falling reading indicates otherwise. If we see another improvement from the 0.6% seen last December, we could see some buying support for the AUDUSD.

The Aussie wiped out yesterday, as a wave of dollar buying caused by the risk aversion tide hit the trading shores. The AUDUSD fell over a hundred pips from its opening price to close at 0.9074.

Tonight, we’ll see if the Aussie bulls will have enough to recuperate their losses from yesterday. First, at 10:15 pm GMT, RBA Governor Glenn Stevens will be delivering a speech at the ACI 2010 49th World Congress in Sydney. It’ll be interesting to see whether he expresses an attitude of confidence in the Australian economy, or if he will continue to show “cautious optimism”. If his statements are more upbeat, it may be a signal that we could see more rate hikes coming from the RBA in the near future.

Later on, at 11:00 pm GMT, the CB leading index will be released. Take note that December’s reading took a turn for the better, as the index rose by 0.6%. Seeing as how the Australian economy has been fairing pretty well so far in 2010, could we expect another rise in the index for January?

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!

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.

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.

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.

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!

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.

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.

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.

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.

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.