The Week Ahead: The inability for oil producing nations to reach an agreement on limiting production at a meeting in Doha, Qatar over the weekend has seen the AUD shed almost 1% in value against the USD in early trade. It is still trading comfortably above 0.7600 USD however it could come under further pressure today as the market digests the impact of a likely fall in oil prices again.
Commodity prices are likely to shape the AUD’s fortunes this week with a notable lack of key economic data. Strong employment figures last week served to strengthen the AUD whilst this week offshore activity and key speakers will likely dominate. The lack of local data this week will also ensure that even more focus is heaped upon the release of the minutes from the April RBA meeting. The minutes will be scrutinized by all and sundry for any reference to the AUD being too high according to the RBA. RBA Governor Stevens will also have an excellent opportunity for attempting to talk down the currency on Tuesday evening. He will be speaking at the Credit Suisse Global Macro Conference in New York in what could shape as an important indicator of the AUD’s short term prospects.
There will also be a number of US Fed members speaking this week accompanying housing, manufacturing and unemployment data. With the likely timing of the next US interest rate hike ebbing and flowing in recent times any clues from the Fed speakers this week will likely be latched onto with gusto.
The Bank of England kept interest rates on hold yet again last week keeping pressure on the GBP. The possibility of the UK leaving the EU appears to be weighing on growth prospectsand it is likely as the vote edges closer for even more scaremongering to occur. Bank of England Governor Carney is scheduled to speak midweek and his speech will be closely followed by average earnings data and unemployment figures.
Across the channel it will also be another big week in Europe with the ECB meeting on Thursday. With soft euro zone data continuing in recent months the revised flat inflation figure for March – rather than the reported -0.1% – provided some glimmer of hope. Core inflation remains at 1% and it will be interesting to see what additional levers if any the ECB will pull to try and reach its target of “2% or a bit below.” A weaker EUR will be central to this. Eurogroup and ECOFIN meetings continue later this week as well.
Chinese data released by the National Bureau of Statistics over the weekend showed growth of only 1.1% in the first quarter of the year (well short of analysts expectations), the slowest quarter-on-quarter expansion in almost 5 years. This figure took some of the gloss off the 6.7% year on year growth reported on Friday and has started raising additional questions as to whether additional government stimulus will be required to reach the 2016 target of 6.5% – 7% growth. Trade balance and manufacturing data in Japan this week will likely be overshadowed by the fallout from the latest earthquake to hit the country.