Weekly Market Preview – July 31 to Aug 6

The Week Ahead.
After surging to yet another two-year high (0.8066) against the USD last week the AUD has reset slightly to open the week at 0.7989. The week ahead will throw up numerous challenges for the AUD that will likely set in place its path for the short term at least. Global tensions, the August RBA policy meeting and key data releases alongside the US Fed’s preferred inflation measure and other data will all serve to set the agenda for the AUD.
We are anticipating that the RBA will keep interest rates on hold yet again at this week’s meeting with soft recent inflation outcomes below the RBA’s target band and a buoyant AUD likely to head off calls for a rate rise. It is possible that these same factors could generate talk of a possible rate cut in the future insteasd although this is equally unlikely in our opinion. The RBA is likely to resist peer pressure from its global counterparts who are heading towards a more tightening bias with the economy not yet performing at a rate that appears to require RBA intervention to cool down. Important Australian data releases for the week include manufacturing and construction data, commodity prices, trade balance and retail sales.
New Zealand data will also flow freely across the week. Building consents and business confidence will get the ball rolling on Monday, employment data is due on Wednesday and commodity prices on Thursday. Interspersed with this data will also be the fortnightly GlobalDairyTrade Auction in the early hours of Wednesday morning. There has been a recent strong string of results for dairy prices with the odd blip and farmers will be seeking another positive outcome. Coming sharper into focus will be the New Zealand general election that is due in September. We are expecting to see data releases and outcomes intertwined into electioneering messages in the weeks ahead dependent upon the political leverage available.
The start of the month this week brings with it a range of important US data that is likely to shape the Fed’s policy in the latter part of the year. The Fed’s preferred inflation measure – Personal Consumption Expenditure – will be released early in the week alongside personal spending and income data. Iflation in the US remains soft and outside of the Fed’s targeted range. This continues to be the missing piece in the Fed’s two-piece puzzle that also includes stability in the labour market. Monthly employment data will be released at the end of the week and we are anticipating approximately 180k new jobs, down from 222k last month. Global tensions and domestic legislative failures by the current US administration continue to weigh on the USD and there appears to be no imminent sign of this reversing at least in the week ahead. On a positive note for the US economy Q2 growth was recorded at an annualised rate of 2.6% following a weaker Q1 growth rate of 1.2%.
The start of the month and the height of the northern summer brings with it a raft of data from Europe. The EUR has continued its strong 2017 performance against the USD having strengthened for the fifth consecutiuve maointh against the greenback. Unemployment, CPI, GDP and manufacturing and services PMI measures are key data releases across the eurozone this week.
The Bank of England is set to  meet this week and we are expecting no change to the policy settings although it is possible that the decsion will not be unanimous. Fallout from the recent election continues to emerge in the buisiness and political news pages with the tax base and Brexit key ongoing themes.
Manufacturing data will commence the economic data week in China on Monday with an expectation of a positive figure following on the heels of last months manufacturing growth. Japanese manufacturing data will also be released alongside CPI, consumer confidence and average cash earnings outcomes.
All in all this will be an interesting global economic calendar for the week ahead with global tensions, doomestic policy and central bank meetings dominating the agenda.
Regards All.
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