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Weekly Outlook: Data Runs Full For the Australian Dollar

By Richard Lee
02 June 2006 21:09 GMT

With consumer spending beginning to suffer, the service sector may see a less positive report during May – although most likely remaining in expansionary territory.  Inflationary numbers also come out on Monday with the TD Securities reading.  April saw prices rise 0.4 percent from March, 2.8 percent from April 2005. As much of the rise was due to record level oil prices during the month, May should not see quite as drastic a rise, but the numbers may not be any more comforting for the already unsteady economy.  Continuing with the news, ANZ job advertisements for May will be released.  The number of newspaper ads dropped by 5 percent during April, however there was a marked rise in Internet job ads.  As Internet ads become more popular, this indicator becomes less telling, but a slow down in the employment market would be bad news for the Aussie as the currency teeters on a fine balance between good and bad news.  Less job opportunities would create further uncertainty in consumers and more softening in consumer spending.  Lastly on Monday are the releases of company operating profit and inventories in the first quarter of 2006.  In the last quarter of the year, a traditionally very profitable quarter for retailers especially, company profits rose less than expected as consumer spending slowed drastically.  As consumer spending has continued to slow, these numbers look to again disappoint.  Tuesday is shaping up to be a slightly calmer day as the RBA is holding its policy-making meeting for an announcement due the next day, which could keep traders tense.  Home loan data for April should be telling for the RBA as high borrowing costs may be cooling the housing market and keeping consumers from taking on mortgages.  During March, there was a rise of 0.7 percent however spurring speculation that the housing market slow down was over.  Information on the affects of the higher interest rate will also be seen in the investment lending release, which may not see as heavy growth during April as the 2.5 percent seen during March due to people becoming more cautious as their budgets are squeezed.  The first quarter current account deficit looks to have shrunk after posting at A$14447 million in the fourth quarter of 2005.  Imports have dropped off a bit during the first quarter as the Australian population seems to be saving more and shedding some of its traditionally credit dependant tendencies.  Thursday, the RBA will announce its policy decision.  Policy makers raised the rate 25 basis points to 5.75 percent at last month’s meeting to cool inflation indicating that another rate hike would be unlikely.  It is widely expected that the RBA will keep the current rate however it is not clear that inflation has been tamed.  The Australian economy over the past month has been on a seesaw of good and bad releases though, and a rate hike would probably be nothing but detrimental.  After the rate announcement, first quarter GDP growth will be released.  Year on year growth in the fourth quarter was 2.7 percent whereas expectations for 2006 fall at 3 percent.  Strong GDP growth would be encouraging to consumers whose sentiment seems to still be damaged.  Finally on Friday, Australia releases its employment numbers.  Unemployment is currently at 5.1 percent, seeing a drop in employment during April.  The trend seems to be steady full time employment with large swings in part time and seasonal employment figures.  Preliminary surveys indicate that these numbers improved slightly during May, hopefully strengthening consumer sentiment. 

 

The Aussie began last week with a steady Monday, trading within a 20-pip band from 0.7579 to 0.7590, without any news.  The next day, retail sales for April rose by 1.4 percent exceeding expectations of a 0.3 percent rise.  At the same time as this Aussie-positive news, building approvals were released to have dropped 3.4 percent from March to April, racking up a 7.5 percent drop from April 2005.  With the conflicting simultaneous reports the Aussie first dropped off about 10 pips but almost immediately jumped up 80 pips.  Markets decided to concentrate on the more positive retail data as, despite the drop in approvals, the housing data was reported to contain some signs of recovery.  However the next day was a bit of a roller coaster ride bouncing as traders attempted to decide how to interpret the news and with hope that the next days releases would clear things up.  Wednesday again however brought conflicting signals.  The release of trade data showed a greater than expected contraction of the trade deficit to A$1093 million in April with a rise in both imports and exports.  Construction work done in the first quarter grew by 0.2 percent, 0.7 percent less than expected.  The rise was from a large amount of work done in the public sector, which masked a large drop in the private and residential sectors.  The underlying breakdown of the release shows a softening in the construction sector, possibly signaling continued softening in the housing market.  Private sector credit grew more than expected by 1.3 percent in April up to an 18 month high.

 

Date

Event

GMT

EST

Consensus

Previous

June 4

AiG Performance of Service Index (MAY)

23:30

19:30

--

56.3

June 4

TD Securities Inflation (MoM%) (MAY)

0:00

20:00

--

0.4%

June 4

TD Securities Inflation (YoY%) (MAY)

0:00

20:00

--

2.8%

June 4

Australian May Job Advertisements

1:30

21:30

 

 

June 4

ANZ Job Advertisements (MAY)

1:30

21:30

--

- 5.0%

June 4

Company Operating Profit (QoQ%) (1Q)

1:30

21:30

--

--

June 4

Inventories (1Q)

1:30

21:30

--

--

June 5

Reserve Bank June Policy-Setting Meeting

 

 

 

 

June 5

Home Loans (APR)

1:30

21:30

--

0.7%

June 5

Current Account Deficit (1Q)

1:30

21:30

--

- 14447M

June 5

Investment Lending (APR)

1:30

21:30

--

2.5%

June 5

RBA Cash Target (JUN)

23:30

19:30

--

5.75%

June 6

Cashcard May Retail Index

 

 

 

 

June 6

Gross Domestic Product (QoQ) (1Q)

1:30

21:30

--

0.50%

June 6

Gross Domestic Product (YoY) (1Q)

1:30

21:30

--

2.70%

June 7

Unemployment Rate (MAY)

1:30

21:30

--

5.1%

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02 June 2006 21:09 GMT