AUD news - page 3

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AUD/USD forecast for the week of July 25, 2016

The AUD/USD pair fell significantly during the course of the week, breaking the bottom of a shooting star from the previous market. With this being the case, the market has quite a bit of support below, so I think that short-term sellers will probably be what runs this market more than anything else. With this, if there is any type of supportive bounce, you may get an opportunity to sell again on short-term charts. As far as long-term trading is concerned, I don’t have any real interest in doing so at this point in time.


 

3 Reasons To Stay Bearish AUD Ahead Of Inflation Data

Ahead of this week’s inflation data, there are three main reasons to stay short AUD, whether against an equally weighted G3 basket or just against EUR, as we recommended last week.

First, an August rate cut still looks underpriced at 60%. Our economists expect core inflation for Q2 at 0.4% q/q and 1.5% y/y. While this is consensus, we believe the RBA’s reaction to such a print will be more dovish than market pricing implies. 

Second, after widening in June and early July, the 10Y yield spread to the US has narrowed again to 35bps, implying bond inflows will cease based on the historical relationship.

Third, positioning and valuation still favour shorts. Positioning data from last week’s IMM report, which captures the post-RBA minutes selloff, still show a large extension in net AUD longs. That position is at risk of a rapid reversal if the RBA displays greater urgency in easing than the market expects, especially since longs are concentrated in the leveraged community seeking short-term carry rather than value.

source

 

Reserve Bank of Australia meeting tomorrow - here comes another cut!

Or, maybe the headline should read (spot the difference): Reserve Bank of Australia meeting tomorrow - here comes another cut?

I'll have more on the RBA today and tomorrow, but for now, here is one of Australia's better RBA commentators, on what he expects:
  • With neither inflation nor the labour market nor real estate prices an impediment, the Bank is likely to move its cash rate from 1.75 to 1.5 per cent on Tuesday
Breaking those 3 salient points down (though I reckon it's the first 2 that are the important ones, house prices haven't been an impediment for a good while, if at all);
  1. underlying measures of annual inflation are the lowest in records going back thirteen years. The headline rate is 1 per cent, well below the Bank's target of 2 to 3 per cent
  2. Employment is growing more slowly than new entrants to the labour force
  3. (House price) actual increases are less alarming
Link is here for more
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The RBA announcement is due at 0430GMT on Tuesday 2 August 2016.
ForexLive will be both live and, err, all Forexxy, over the announcement.
 

RBA Preview: Low Inflation, Strong AUD Put Odds in Favor of Rate Cut


Markets are pricing in a strong chance that the Reserve Bank of Australia (RBA) will make history tomorrow by cutting the cash rate to a record-low 1.5%, in a bid to revive inflation and fast-track an economic recovery amid the mining downturn.

Last week's June-quarter inflation figures were a mixed bag, with core inflation coming in slightly stronger than the RBA expected, but headline inflation slowing to a 17-year low of 1.0%.

Markets were pricing in around 50-60% odds of a 25 basis points cut to the cash rate in August after the inflation data was released on Wednesday, down from 70% ahead of the figures, although most economists remain steadfast in their predictions that the RBA will act on Tuesday.

"Australia’s inflation data for the second quarter provided something for everyone, but the bigger picture is that there is very little price pressure anywhere in the economy," chief Australia economist Paul Dales from Capital Economics said in a note. "This is why we believe the RBA will cut interest rates to 1.5% on Tuesday and why it may also reduce rates to 1.0% next year."

read more

 

NAB expects the Reserve Bank of Australia to stay on hold today

"The reason for NAB's view of no change in the cash rate stem primarily from analysis that the RBA's forecasts for growth and inflation will not have materially altered since the Board last met in July, and indeed since the last set of published RBA forecasts, released in May."

The market has continued to price toward the likelihood that the RBA will cut rates again at tomorrow's Board meeting, pricing in this morning a 64% chance of an easing, with 36 of 47 economists surveyed by Reuters on Friday forecasting a cut this week.

NAB continues to expect that the RBA will, after due consideration, agree to leave the cash rate unchanged at 1.75%. Market price reaction will likely be greater in the event the RBA leaves rates on hold.

The reason for NAB's view of no change in the cash rate stem primarily from analysis that the RBA's forecasts for growth and inflation will not have materially altered since the Board last met in July, and indeed since the last set of published RBA forecasts, released in May. Nor are international factors or market conditions suggesting new downside risks. When the Board met last month, the Governor's Media Statement stated that "holding monetary policy steady would be prudent at this meeting ..... (and that) ...... "over the period ahead, further information should allow the Board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate."

That assessment for growth and inflation, NAB expects, will not have materially altered since the Board last met. Last week's key CPI release for the June quarter revealed headline inflation of 1.0% y/y and underlying inflation of 1½%, inflation predicted in its May Statement on Monetary Policy.

 

RBA announcement: CUT RATES by 25bp

Reserve Bank of Australia monetary policy announcement

  • Says global economy growing at a pace below average
  • Judged economic growth would be improved by easing
  • Rising AUD could complicate economic transition
  • Underlying pace of growth in China economy appears to be moderating
  • Recent Australian data suggests overall growth continuing at a moderate pace
  • Says labour market data continue to be somewhat mixed
  • Less risk of low rates overheating housing market
  • Says recent data confirms inflation remains quite low, expected to remain case for some time

Quick headlines from the statement via Reuters

AUD quickly marked lower and then a bit of a bounce back - currently around 0.7517

 

Australia - Services PMI (July): 53.9 (prior 51.3)

Australian industry Group Performance of Service Index

Not quite as big a jump as the manufacturing PMI fro AiG on Monday, but not too shabby!

The key points from AiG
  • Third consecutive month of expansion
  • A stronger rate expansion in activity across the services sector
  • Of the five activity sub-indexes, sales (59.4 points) lifted by 6.6 points in July, the strongest reading since August 2015. Deliveries (54.5 points) rose by 6.0 points and stocks (52.8 points) gained 6.2 points. New orders (52.2 points) were steady (up 0.4 points from June), while Employment (50.0 points) dropped by 3.1 points, indicating stable employment in July
  • Three of the nine services sub-sectors expanded in July (in three month moving averages) and two were stable. Retail trade (65.0 points); finance and insurance (62.0 points) and communication services (53.2 points) expanded in July. The very large health & community services (50.2 points) and property & business services (49.1 points) sub-sectors were stable in July. Wholesale trade (48.9 points), personal & recreational services (46.7 points), hospitality (40.3 points) and transport & storage (33.6 points) all contracted, with transport services recording its weakest conditions since 2013.
  • The input costs (55.3 points) sub-index by 8.0 points in July, suggesting prices continued to increase but at a slower pace than in June (possibly due to Australian dollar fluctuations). Selling prices (52.4 points) went up in July, for the first time since October 2015, while wages (49.4 points) were roughly stable in July.
  • Respondents noted that the uncertain period leading up to the Federal election on 2 July may have had a lingering dampening effect on business activity in July. For retailers, an unusually cold and wet winter is a proving to be a positive influence on winter sales.
 

Aussie Rises Despite Miserable Retail Sales


The AUD/USD pair was trading near daily highs during the morning session, seen around $0.7620 and 0.40% stronger on the day.

During the Asian session, Australian retail sales for June failed to meet expectations and printed only 0.1% month-on-month, down from 0.2% booked previously.

This data followed a set of weaker economic numbers from Tuesday, when building approvals came out below market estimates and stayed deep in negative territory, while the trade deficit also widened notably in June.

In addition, the Reserve Bank of Australia (RBA) cut the key interest rate by 25 basis points to a record low of 1.50%, which was greeted by a 1.5% rally in the AUD/USD pair.

Furthermore, according to ANZ: "Former RBA board member John Edwards said on ABC TV that the RBA has a huge amount more it could do, including buying bonds, mortgage bonds, intervening in the AUD, and moving to negative rates."

Nevertheless, the aussie decided to ignore all the negative news and just kept on rising, jumping above $0.76 again.

There are no major US data on the agenda today, apart from jobless claims and factory orders, with traders slowly turning their attention to Friday's labor market data.

source

 

AUD/NZD: Complete Correction Confirmed; Bullish Signal Targeting 1.08/1.10


NAB Techs flags a bullish technical signal for AUD/NZD after Wednesday’s NY close above 1.0557, which according to NAB, completes a bullish three-day price pattern and confirms a complete correction targeting pric a shift higher into the 1.08/1.10 range with risk to 1.1250/1.1350 as further bullish confirmation.

"MT momentum bias has shifted to positive confirming the impulsive positive shift in price. ST momentum has shifted to negative in the last 2 weeks as price corrects lower. We would like to see a positive shift in ST momentum to confirm the next upswing.

LT momentum (RSI) remains below an eight-year trend line that must ultimately be broken before we consider that a material LT uptrend is in play," NAB adds.
 

RBA: Underlying inflation to remain under 2% for much of forecast period

Reserve Bank of Australia Statement on Monetary Policy

This is published once a quarter

RBA quarterly statement repeats policy easing to help foster growth, offers no forward guidance

Underlying inflation to remain under 2 pct for much of forecast period, reach 2 pct by end 2018

Prospects for economy positive, but low inflation allows for "even stronger growth"

Judged risks associated with rising house prices and debt had diminished

Says AUD remains significant source of uncertainty for inflation, growth forecasts

Economic growth and inflation forecasts little changed overall

Forecasts underlying inflation 1.5 pct by end 2016, 1.5-2.5 pct end 2017, 1.5-2.5 pct end 2018

Forecasts gdp growth 2.5-3.5 pct end 2016, 2.5-3.5 pct end 2017, 3-4 pct end 2018

Says unemployment to fall only a little out to 2018, employment growth to be modest this year

Drag on gdp from falling mining investment looks to have peaked, non-mining still subdued

Dwelling investment to stay strong for next year or so, but raises risk of oversupply

GDP growth looks to have moderated in q2 as net exports added less

Says wage growth expected to remain low, rise modestly out to 2018

Increasing supply, china steel cutbacks to put downward pressure on iron ore prices

Growth in china expected to slow gradually over next few years, housing a risk

Brexit to have limited effect on Australia's major trading partners

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