The Aussie got wiped out in Friday’s trading session, as a wave of risk aversion seems to have hit the market. The strong tide seems to have swept away the optimism that had been driving higher yielding currencies higher the past couple of weeks. Could the Aussie be in line for more losses this week?
Late on Sunday, Treasurer Wayne Swan said that the Australian government would cautiously withdraw the economic stimulus measures, pointing to improvements in their economy. The government has already taken out some measures, like reducing the amount of home loans to first time buyers while cutting back on tax incentives that it had given to some small time businesses. Swan’s comments could be taken as a subtle hint that the [RBA](http://www.babypips.com/forexpedia/Reserve_Bank_of_Australia) will go ahead and raise rates once again this coming February to 4.0%.
With no data coming out today from Australia, the Aussie will probably be driven by degrees of risk sentiment once again. As for the rest of the week, not much high impact reports are on schedule but watch out for the NAB Business Confidence index, which could be released any time within the next 10 days. If this report comes in to show continued optimism in the business sector, it may just provide the Aussie the boost it needs to recover from last week’s losses.
The Aussie got back in stride yesterday, rising to a high of 0.9280 against the greenback. With most US traders and bankers off in commemoration of Martin Luther King day, the US dollar weakened against most major currencies.
Although Australia and the US did not release any economic reports yesterday, the AUDUSD was able to recover some of its losses from last week as investors’ risk sentiment improved. Traders probably pushed the pair higher on speculations that the RBA is set to implement another rate hike next month, based on Australia’s rising inflation. Recall that the Melbourne Institute recently reported inflation gauge showed that price levels rose by another 0.3% in December 2009.
Australia’s economic schedule has only one report for today and that’s the Westpac consumer sentiment index due 11:30 pm GMT. After dropping by 3.8% in December, consumer sentiment could improve slightly this month. Otherwise, the AUDUSD could return yesterday’s gains, considering how another negative reading would mark the indicator’s third month in consecutive declines.
The AUDUSD’s price action could also take cue from it’s fellow commodity-based currency, the USDCAD, which will most likely be driven by today’s BOC rate statement at 2:00 pm GMT.
Just as Maria Sharapova fell short in winning a decider versus Maria Kirilenko in the opening round of the 2010 Australian Open, the Aussie, in a similar way, failed to close out the dollar after staging a strong rally during the last part of yesterday’s session. The score? Open: 0.9266, Low: 0.9176, Close: 0.9248.
Australia’s consumer sentiment soared by 5.6% in January after falling by 3.8% in December. The latest run in confidence is the most that it had in six months, adding to the possibility that the RBA may hike its interest rate again this February. The country’s improving labor market appears to be one of the major reasons why confidence among consumers has shot up. At present, Australia’s jobless rate is standing at an eight-month low of 5.5%.
Still, the AUDUSD was not able to gain any support despite the rosy Westpac consumer sentiment figure.
At midnight later, Australia’s latest inflation expectation will be released. The account estimates the consumers’ outlook on inflation for the next 12 months. This gauge has a tendency to be ‘actual’ since workers tend to haggle for higher wages if they see that prices will increase as well. Expectations for the next 12 months are expected rise again.
The Aussie, though, could take cue from China’s fourth quarter GDP and December industrial production releases. China’s is expected to post a 10.5% growth during the fourth quarter while production in December is projected to have soared by 19.6%. Australia is the main supplier of China’s input materials. Hence, any growth in the mentioned accounts, especially with that magnitude, could reflect positively on Australia and on the Aussie as well.
The news that China would tighten its lending policy gave the bears a chance to take the Aussie a couple of notches lower yesterday. From an intraday high of 0.9255, the Aussie plummeted and found itself at 0.9071 by the end of the US trading session.
Apparently, the China Banking Regulatory Commission thinks that their economy is growing too fast which could sky rocket inflation. To curb this, the commission is thinking of suspending lending in January… which sent currency traders running away from the Aussie. Australia, after all, is one of China’s major trading partners.
Now, moving on to economic data… The MI inflation expectation report just released showed that consumers expect prices to rise 3.5% over the next twelve months. Also released was the new motor vehicle sales report for the month of December. It revealed that sales grew 3.3%, lower than the revised up 5.9% rise seen in November.
Later, at midnight, expect to see Australia’s report on import prices for the final quarter of 2009. The expectation is that prices dropped once again, this time by 1.7%. If forecast holds, it would mark the fourth consecutive quarter of decline, which could bring about the speculation that consumer spending is still subdued. Weak spending usually leads to reduced growth as consumer activity makes up more than two-thirds of Australia’s economic activity.
The Aussie bounced back and forth during the earlier matches, but found itself smashed up as the markets rallied behind the safe havens. The AUDUSD closed at 0.9022 after hitting a high of 0.9147 during the day.
Early this morning, the Australian import prices report was released. The report showed that import prices fell more than expected, as it fell by 4.3% during the 4th quarter of 2009. As I mentioned yesterday, this marks the fourth straight quarter that import prices have fallen, indicating that consumer demand is still weak.
Nothing coming up for the rest of the day. If you’re a tennis fan, you could catch up and watch the Australian Open, but be sure to keep an eye out for news coming out from other countries. Will risk aversion continue as we end the week? Or will traders look to make some profit taking moves? Watch out!
After enduring an entire week of losses, the Aussie had a bumpy ride last Friday as it moved up and down against the greenback. Well, at least the AUDUSD kept its head safely above the psychological 0.9000 handle! I wonder whether it’ll stay afloat this week.
At 12:30 am GMT today, Australia will release its PPI reading for the fourth quarter of 2009. Another 0.1% increase in producer prices is expected as inflationary pressures start to ease. This report should set the stage for the upcoming CPI release on Wednesday 12:30 am GMT. Consumer prices rose by 1.0% during the third quarter of 2009 and are expected to climb by a mere 0.4% in the fourth quarter. If the actual figure meets the consensus, it would bring annual inflation to 2.3%. Amidst these moderated inflation readings, the RBA is still widely expected to hike rates on their next policy meeting in February 2.
Other reports due from the Land Down Under this week are the MI leading index, the CB leading index, and the NAB quarterly business confidence reading. The November MI leading index, which is due Tuesday 11:30 pm GMT, could print another expansion after seeing a 0.4% rise last October. The CB leading index, on the other hand, broke its five month positive streak last October as it fell by 0.3%. The November reading, which is due Thursday 11:00 pm GMT, could print a rebound. Meanwhile, the NAB business confidence reading due Friday could stay at the positive zone for another quarter after landing at 16 in the third quarter.
Be wary of top-tier US economic reports and events this week since these could have a say on risk sentiment. This week, we’ll find out whether Fed Chairman Ben Bernanke would stay for another term. If Bernanke’s stint as Fed Chairman ends this week, markets would certainly react to the uncertainties over Bernanke’s replacement. Also due this week is the FOMC statement and the US GDP reading for the fourth quarter. Pretty exciting, don’t you think?
The Aussie hit an ace during its first serve against the greenback and the yen as both the AUDUSD and the AUDJPY gapped up when the Asian session opened. For the remaining of the game, however, the Aussie only managed to secure a close win over its two opponents.
Australia’s PPI for the fourth quarter of last year unexpectedly fell to -0.4% versus the 0.1% forecast. This drop in producer prices could be negatively reflected in the Australia’s CPI which will be reported this Wednesday. Anyway, the Aussie initially fell following the PPI’s result but buying interest, perhaps due to profit taking from last Friday’s sell-off, kept the currency afloat to a certain degree for the rest of yesterday’s trading.
No economic reports are due today in Australia. The Aussie could once again trade in a range-bound fashion given the lack of economic flows.
Demand for the Aussie fell yesterday when the news that China wants its some of its banks to increase their reserve ratio hit the markets. From the Aussie’s open price at 0.9049, it went as low as 0.8938 before finding some buying support.
Australia’s consumer price index just released gave the Aussie a little push though. It showed that the average level of prices for the last quarter of 2009 rose 0.5%, slightly higher than the 0.4% forecast. It seems that currency traders are speculating that the small unexpected uptick in the country’s inflation rate could pressure the RBA to go on another rate rate hiking spree. Then again, isn’t it too early to tell? Given the uncertainty surrounding this “global recovery” we’re currently experiencing, anything could happen…
In any case, Australia’s economic calendar today is free of any data so keep a close eye on news coming out of other major economies instead. Specifically, watch out for the Fed’s interest rate decision at 7:15 pm GMT tonight. Any hint of the Fed considering another expansion of its QE program could send the Aussie flying!
Once again, the Aussie was blown away by the might of the USD! While losses were limited, it marked the 6th time in 7 days that the AUD has fallen. The AUDUSD now stands at 0.8942. My question is, how much further Down Under will it go?
Tonight at 11:00 pm GMT, the CB leading index report is due. The index tries to measures the direction of the economy based on 7 economic indicators. Last month’s figures showed a decline in the index of 0.3%. Given that this was for the month of October, can we expect an uprise for this month? Take note that in November and December, the RBA hiked interest rates, which reflects growing sentiment towards economic recovery.
Tomorrow, credit data will be available at 12:30 am GMT. It is expected to show that new credit issued to consumers rose by 0.1% during December. While this isn’t a high impact event, I’d still keep an eye out for it. Remember, the RBA will be making its interest rate decision next week. If this figure comes in worse than expected, could the RBA take this as a sign that their decision to hike rates is making it harder for consumers to obtain credit? Could this lead to a pause in raising rates? Maybe, just maybe – we’ll have to wait and see!
Wipe out! The AUDUSD crashed below the 0.9000 handle yesterday as the greenback extended its gains. Commodity prices were virtually unchanged, providing no support for the Aussie and its com-doll buddies. Plus, a wave of risk aversion left the com-dolls helpless against the safe-haven currencies.
The freshly released CB leading index fell by another 0.3% in November, signaling that economic conditions are no longer improving for the Land Down Under. On the bright side, the private sector credit report posted 0.3% growth in the total value of new credit issued to consumers and businesses, beating the consensus of a mere 0.1% uptick.
No other reports are due from Australia until the end of the week so that means AUDUSD price action would be mostly driven by economic releases from the US and changes in risk sentiment. Watch out for the release of the US fourth quarter GDP at 1:30 pm GMT today. Stronger than expected growth could reinforce US dollar buying!
The Aussie got beaten four sets to one by the dollar and yen in last week’s Australian Open. The AUDUSD sunk to and closed at 0.8848 from 0.8949. Similarly, the AUDJPY slid to and settled at 79.86 from 80.41.
Despite the 5.7% 4Q growth of the US, higher yielding currencies like the AUD still slipped as investors speculated that the Fed would hike its interest rate sooner rather than later.
This week is going to be very hectic in Australia given the release of several tier 1 economic reports. Earlier today, both HIA new home sales and ANZ job advertisements printed a dismal decline in January. New home sales fell by 4.6% after posting a modest 0.3% gain during the month prior. Job advertisements also slid by 8.1% during the same period. Australia’s labor market, however, remains, to be upbeat given the unexpected improvement of its unemployment rate to 5.5% from 5.6% in November.
Australia’s fourth quarter HPI was also issued earlier today. The index showed a 5.2% gain, indicating that demand in Australia’s housing market is improving over the longer term.
Tomorrow, the RBA will decide on its interest rate. The RBA is expected to hike its overnight cash rate for the fourth time to 4.00% from 3.75%. Despite the drop in job ads and China’s recent contractionary policies, the central is still likely to raise its rates given its solid fundamentals particularly in its labor and housing markets. During the bank’s last decision where it hiked its rate, the market sold the Aussie on news. The same could happen again.
On Wednesday, Australia’s trade balance for the month of December will be issued. The country’s trade deficit is seen to balloon to –A$2.36 billion from –A$1.70 billion. If the estimate is on the money, we could then see the Aussie fall lower against the yen and the greenback.
The country’s retail sales and building approvals are due on Thursday. Both accounts are projected to print modest gains in December. Retail sales are expected to expand slightly by 0.3% on top of last month’s 1.4% rise. Building approvals, however, are seen to remain flat at 0.0% after previously gaining by 5.9%.
The Aussie started the week on a good note yesterday, retracing all of its losses from Friday’s trading session. From its week open price of 0.8800, the Aussie was able to rise up and close the US trading session at 0.8914.
I suspect the upward move has much to do with traders positioning themselves ahead of the RBA rate statement today at 3:30 am GMT. Now that the country is showing a lot of evidence of recovering, The expectation is that the bank will hike rates for the fourth straight time to 4.00%. The most recent data on the country’s labor market showed that joblessness in December the country eased to 5.5% from 5.6% the month prior (revised down from 5.7%).
Traditionally, interest rate hikes are bullish for the domestic currency but, like I mentioned yesterday, do watch out for the upcoming one as traders sold the Aussie on the RBA’s last rate hike decision. We could see the same today, given the bias in buying-dollars we’ve been seeing.
Much later on, at 12:30 am GMT, Australia’s trade balance will be released. The trade balance measures the net difference in value between exported and imported goods for a given period. If more goods were exported, the balance would be positive, which called a surplus. On the other hand, if more goods were imported, the balance would be negative,which is called a deficit. The forecast is a deficit of 2.36 billion AUD in December, higher than the 1.70 billion AUD deficit seen the month before.
The Australian dollar started off the day on a poor note but was able to recover its losses by the time the closing bell rang. The AUDUSD traded as low as 0.8780 before bouncing back to close at 0.8868.
Surprise! The Reserve Bank of Australia decided not to hike rates yesterday and kept the base rate at 3.75%, as RBA officials suddenly became more cautious in their stance on the economy. According to RBA head Glenn Stevens, he wants to “wait and see” what the effects of past rate hikes are before any more rate hikes are made. It seems to me that they are still cautious about the recent moves by China to curb growth. Take note, China is one of the major importers of Australian goods – if the Chinese government makes moves that will curb spending, it will have an effect on the Australian economy as well.
My buddy Forex Gump just wrote about this issue yesterday, I suggest you check out his blog for more insight!
Early today, trade balance figures were released. The report printed that the deficit widened to 2.25 billion AUD, up from 1.70 billion AUD in November. The deficit rose as imports increased last month, hinting that demand may be rising. I’ll be watching out for this figure in coming months to see whether or not China’s recent moves will have a major effect on trade with Australia.
Tomorrow, we could see big moves once again in the Asian session as a couple of high impact reports are on deck. At 12:30 am GMT, both building approvals and retail sales data will be available. Building approvals are expected to have remained steady in December after rising by 5.9% in November. Meanwhile, retail sales are seen to have risen by just 0.3% during the same month. This would be pretty disappointing, as retail sales normally post good figures during the holiday season. Seeing as how these two figures are expected to show minimal gains at best, if they come in any worse than expected, we could see the AUD take a hit in currency trading.
The Aussie got whipped by the US dollar yesterday, causing the AUDUSD to crash to a low of 0.8816 during the US session. It also didn’t help that, earlier that day, Australia’s trade deficit was reported to have widened in December.
Australia’s trade deficit widened from A$1.73 billion to A$2.25 billion as imports outpaced exports in December. This weaker figure could be grounds for the RBA to pause their rate hikes for yet another month. Still, the huge leap in imports this indicates that local demand is still going strong for the Land Down Under. Aside from that, exports posted 4% growth from the previous month. This increase was mostly a result of higher demand for Australian coal.
Today’s economic docket has a couple of significant economic reports from Australia. First, the retail sales report, which is due 12:30 am GMT, could print a measly 0.3% uptick in December. This would be much less than the previously reported 1.4% growth in retail sales last November. However, we could be in for an upside surprise since we all know how consumer spending usually picks up during the December holidays.
Next, the building approvals report, which is also due 12:30 am GMT, could show that the number of building approvals issued in December dipped by 0.2%. This possibly lackluster report could drive the Aussie even lower, especially since building approvals rose by a staggering 5.9% in November.
Nothing seems to be happening right for the Aussie as of late. It had another day of woes yesterday as it slid sharply against the yen and the greenback. The AUDJPY crashed to 76.89 from 80.33. The AUDUSD also dove to 0.8647 from 88.30.
Australia’s building approvals and retail sales figures in December were issued yesterday. While the country’s building approvals registered a gain of 2.2% last month on top of the 10.4% advance in November, the heavier retail sales account suffered an unexpected 0.7% decline. This was the point when things started to go wrong for the Aussie as it lost support following the report.
Selling pressure continued to pile when fear regarding the fiscal condition of Portugal, Greece, and Spain hit the news during the euro session. During the US session, the Aussie got ‘haymaker’ sort of blow when the US’s initial jobless claims recorded a worse-than-expected number for the last week.
Earlier today, the RBA issued their monetary statement. Remember that the RBA recently surprised the markets by keeping its rate steady at 3.75% instead of raising it to 4%. The RBA reasoned that the effect of their previous hikes is yet to be fully manifested in the markets. Still, the bank that the economy will continue growing at around 3.25% during the last quarter of this year even if they increase the interest rate to 4.5%.
No other economic reports are due in Australia today. Investors, however, will tune in later to the release of the US employment report. Volatility is expected to be at a high gear upon the report’s announcement. Non-farm payrolls are seen to be at 10,000, its first positive mark since last year. A positive score may just be what the capitals markets and the higher yielding currencies like the Aussie need to half their current decline.
The Aussie took a turn for the worst last week when the RBA decided to keep rates steady. From its week open price of 0.8800, the commodity-based currency took a major hit, falling almost 150 pips to close out Friday at 0.8672.
Looking ahead the week, we’ve got a couple of high-profile economic reports due.
On Wednesday, at 1:30 am GMT, Australia’s December home loans will be released. The report measures that monthly percentage change of home loans approved. The forecast for the month is a drop of 4.7%, lower than the 5.6% decrease seen in November. Falling home loans is usually seen as bearish for the domestic currency, as it could mean that the number of people who are financially capable of buying homes are few.
On Thursday, at 1:30 am GMT, expect to see Australia’s employment situation report for January. The good news is that the number of employed people is expected to have grown by 15,100. The bad news is that joblessness in the country probably edged up to 5.6% from 5.5% the month before. Judging from the employment situation report released the previous month, better-than-expected results on this one would probably give the Aussie a much needed boost.
Good thread, good information. Thanks!
Cheers.
@ Gambitrader - Thanks for the compliment. I’ll be posting my Australia update in a bit.
The Aussie dollar fell yesterday against the US dollar as commodities traded lower. The AUDUSD pair fell to 0.8646 after gapping up over the weekend. Will the AUD find any support later this week?
Tonight, the Westpac Consumer Sentiment index is due at 11:30 pm GMT. The index measures consumer confidence and is considered as a leading indicator of consumer spending. While there is no early estimates for this month’s release, last month printed that the index rose by 5.6%. Given how Australia’s outlook has dimmed a bit - remember, the RBA did not hike interest rates last week – could we see a dip in consumer confidence?
Also, the NAB Business Confidence index will be released this week, possibly as early as tomorrow. It is expected that the quarterly index rose to have a positive score 16 the previous quarter. Now, it wouldn’t surprise me if we see another uptick in the index – after all, the reported period was during the time when the RBA was hiking rates! However, as I said, circumstances have changed early this year, so even if this index comes in better than expected, it may not provide a boost to the slumping AUD.
Surf’s up, dude! A fresh wave of risk appetite, spurred by news of an aid plan for Greece’s debt, hit the markets and allowed most majors to recover some of their losses against the greenback. As a result, the AUDUSD edged close to the 0.8800 handle during the US session.
On Australia’s economic front, data was a bit disappointing. The Westpac consumer sentiment index showed that financial confidence fell by 2.6% in February. Analysts expected a 4.0% improvement in consumer sentiment for February, following January’s 5.6% increase. Later on, the home loans reported printed a staggering 5.5% decline, worse than the consensus of a 4.8% drop.
Australia won’t be releasing any economic reports for the rest of the day but keep an eye out for the trade balance data from China, Australia’s major trade partner. Their trade surplus is expected to widen from 18.4 billion CNY to 20.2 billion CNY in January. Estimates show that China’s imports could surge by an eye-popping 100% year-over-year during the month, boosted by rising commodity prices and higher demand.