AUD/USD Lower Ahead of RBA Policy Meeting
THE TAKEAWAY: Retail Sales in miss month-over-month increase expectations with flat reading > Chinese services PMI remains the same > Market likely looking toward RBA meeting > AUD/USD Lower
The Aussie traded lower against the US Dollar as one measure of consumption in Australia slowed in June. Retail sales missed expectations for an increase of 0.4 percent with a flat month-over-month reading. However, the Australian dollar moved slightly higher on Chinese data from HSBC that reported very little change in the services sector on the mainland. PMI remained the same at 51.3, above the 50 expansionary mark.
The key event risk for the pair this week will be the Reserve Bank of Australia’s interest rate decision tomorrow at 4:30 GMT. At the time of this writing, swaps are pricing in market expectations for a 91% chance for a rate cut. Although such a move may reduce the appeal of the Aussie to yield-seeking investors and move the pair lower, it may not be as market-moving as rhetoric suggesting the central banks’ forward guidance. Commentary perceived to be ambiguous could amplify the role of domestic economic data in fueling expectations for RBA policy.
Overseas developments will also remain influential for the pair. As Australia’s largest trading partner, data on Chinese output will likely serve as a proxy to gauge the health of Australian exporters. Figures suggesting another slowdown could lead investors to speculate on prolonged easing from the RBA and move AUD lower while positive numbers could do the opposite. US event risks include a number of speeches from Federal Reserve officials whose rhetoric will likely drive trader speculations on Fed policy after last week’s disappointing NFP numbers.
AUD/USD (5-Minute Chart)
Source: FXCM Marketscope
Jimmy Yang, DailyFX Research Team