Tuesday’s high impact news events begin with the RBA (Reserve Bank of Australia) announcing their interest rate decision. Currently at 1.5% there is little expectation for a rise or cut, despite August representing the annual anniversary of the record low 1.5% rate. In the last monetary policy statement (accompanying the rate hold in July), the RBA cited: low wage growth, marginal job growth, inflation being under control, soft construction and unrealized GDP growth targets at circa 3%, as reasons for their current stance. Shortly after the last rate hold on July 4th, AUD/USD sold off sharply, failing from US76.8c to US76.34c in the minutes following the announcement.
However, the recovery of the major currency pair over the past month has been spectacular; rising from a low of circa 76.000 on July 6th, to breaching the 80.000 handle on July 27th, a close on 400 pip gain and the highest level versus the U.S. dollar witnessed since April 2015. The Aussie gains have not necessarily been confined to its U.S. dollar pairing; versus the UK’s pound, and the Swiss franc, the gains have followed a similar, but not identical pattern. Based on the reaction in July, another immediate change in the value of AUD should be anticipated, whatever the rate decision and therefore traders should adjust their AUD positions accordingly.
In terms of European news German unemployment is expected to remain unchanged at 5.7%, however, it’s the European GDP number that investors will be focusing on; the forecast is for an increase in Q2 to 2.1%, from the 1.9% growth figure registered in Q1. If the reading misses, or beats the forecast, then the euro could move dramatically.
Attention then turns to the USA, when a series of: income, spending and consumption data is published. The personal consumption release, referred to as “the PCE”, is the high impact event, predicted to come in at no change from the 1.4% recorded in May. Several PMI and ISM readings are published for the USA. The ISMs for employment, forecast to remain consistent at 57.2 and manufacturing, predicted to fall to 56.4 from 57.8, are the most prominent releases. Any significant variation on the forecasts for the data listed, could impact on the U.S. dollar.
Tuesday’s high impact events close with New Zealand’s unemployment rate and the employment change rate. Unemployment is forecast to come in at 4.8% for Q2, a fall of 0.1%, whilst employment is forecast to fall to 4.1%, from 5.7% in Q1. These key metrics accompany a series of employment related NZ data and YoY house price data. Therefore the overall impact to the kiwi versus its main peers, could be significant and dramatic.
