The Week Ahead: The AUD has opened the week hovering around 0.7600 against the USD following the RBA decision to keep interest rates on hold and the US jobs data that was released in the late US trade on Friday.
Following the RBA decision the AUD consolidated as it pushed higher against the USD to reach a near three-month high before settling lower around 0.7600. Activity in the UK that we will discuss further below has seen the AUD shoot beyond 0.6100 against the GBP whilst nudging 0.6800 against the EUR. The AUD also benefited against the NZD following a week of consolidation and is now around 1.06 against the kiwi following recent activity that raised again the prospect of the possibility of trans-Tasman parity.
It is shaping up to be a relatively quiet week on the local Australian data front. Business confidence, housing finance, consumer sentiment and inflation expectations data are the notable indices before the RBA Financial Stability Review is released on Friday. New Zealand data is also muted this week with manufacturing index and food price measures the only data of note due out on Thursday.
The US non-farm payrolls data released late on Friday in the US came in at 156k new jobs, short of an anticipated 175k but an acceptable figure for markets nonetheless. Whilst this result did nothing to suggest that the US Fed will have to act in November it does add further credence to the possibility of a December rate rise. Of course we also have the small matter of a US Presidential Election and the second Presidential Candidate Debate this week and we can expect all matter of chatter and commentary to emerge from this. One interesting and topical measure to watch following the first debate was the USD/Mexican Peso rate and this will no doubt be scrutinized again when the “winner” of the debate is determined.
The minutes from the recent US Fed FOMC meeting will be released in the early hours of Thursday morning (AU and NZ time) and they will be interesting to dissect. With three dissenting votes to the majority decision to keep rates on hold (the first time since the 1990’s) the minutes could outline some robust discussion as to the closeness of the decision. Fed Chair Yellen is also scheduled to speak late on Friday US time following the release of consumer sentiment and inflation expectation data.
The GBP went on a wild ride in late trade last week plunging dramatically as the Brexit discussion continues to unfold in the UK. This could be the first of many market reactions to the Brexit discussion and roadmap and how the UK and EU intend to manage the divorce. European data this week includes important German and euro zone economic sentiment indices as well as French and German CPI figures. Also emerging over the weekend has been a suggestion from ECB President Draghi that the euro zone inflation target could be reached by the end of 2018 or early 2019.
China returns from a week-long public holiday with key data to be released on Thursday and Friday. Trade balance figures as well as CPI and producer price data will be the major announcements of the week.