Next week, on September 5th, there will be another meeting of the Reserve Bank of Australia (RBA), following which the regulator will decide the fate of the interest rate. However, there’s no intrigue regarding the formal outcomes of the September meeting. It’s highly likely that the central bank will keep the rate at its current level, as it did in the two previous meetings.
After publishing the report on the growth of July’s inflation, the chances of additional monetary policy tightening in September have virtually dropped to zero. The focus of traders will be on the rhetoric of the RBA’s accompanying statement and the phrasing used. If the central bank implies that the rate will remain at 4.1% in the subsequent meetings this year, the Australian dollar might face additional pressure. If, however, the regulator allows another round of monetary policy tightening, the Aussie might rally. It’s also worth noting that the September meeting will be the last one chaired by Philip Lowe. Starting in October, he will be replaced by Michele Bullock, the current deputy governor of the RBA.
At the beginning of this week, AUD/USD buyers attempted several times to break the 0.6500 target. However, they failed to secure within the 65-figure range, after which the pair got stuck in the price range of 0.6450–0.6520 (the Tenkan-sen line on D1 – the upper line of the Bollinger Bands indicator on H4). The pair alternately bounces off the borders of this corridor, reflecting the indecision of both buyers and sellers. Although, in essence, such dynamics primarily show the hesitancy of dollar bulls—the rise of AUD/USD is mostly due to the situational weakening of the greenback (consequently, impulsive drops are due to the situational strengthening of the U.S. dollar). The Australian dollar is currently not playing its own game and is being led, while the greenback is leading.
Yesterday’s Chinese macroeconomic data, which turned out to be relatively good, couldn’t support the Aussie. For instance, China’s PMI index for the manufacturing sector entered the “green zone,” rising to 49.7 (forecasted at 49.2). Although the indicator is still below the 50-point target, its upward trend has been noted for the third consecutive month. China’s non-manufacturing activity index fell short of the forecasted level (51.0 instead of the predicted rise to 51.3) but remains “above water.”
The Australian dollar essentially ignored this release (excluding a sharp impulsive spike). The AUD/USD pair dutifully follows the greenback, which, in turn, responds to the mixed news flow.
After the U.S. Department of Commerce downgraded its GDP growth estimate for the second quarter, and specialists from the ADP agency published disappointing data in the realm of the American labor market, the likelihood of a rate hike at the September Federal Reserve meeting dropped to 9%, and to 29% for the November meeting (according to data from the CME FedWatch Tool). The greenback reacted accordingly, declining across the board. However, the previous day turned out to be in favor of the U.S. currency. It was revealed that the core Personal Consumption Expenditures (PCE) price index in July rose by 4.2% year-on-year, following a two-month decline. Additionally, the weekly figure for the initial jobless claims entered the “green zone,” settling at 228,000 (the best result since late July). Following these releases, the probability of a November rate hike increased to 45%, while the September chances remain low (11%).
Against this backdrop of conflicting news, the U.S. dollar index has been oscillating, reflecting overall uncertainty among traders. Possibly, the August Non-Farm Payrolls might tip the scales one way or the other, but the report would need to surprise either positively or negatively. If the figures are as expected, major dollar pairs will continue their sideways movement awaiting the next key news driver.
Regarding the AUD/USD pair, there won’t be a long wait: the Reserve Bank of Australia (RBA) is set to meet again on Tuesday, September 5th. Recent inflation data in Australia suggests that the central bank will likely keep rates at current levels. Recall that the consumer price index in July rose by 4.9%, with a growth forecast of 5.2%—the indicator has been declining for three consecutive months, reaching a 17-month low. Considering such a result and the dovish tone of the previous RBA meeting’s minutes, it’s safe to assume that the regulator will maintain a similar stance in September, exerting slight pressure on the Aussie.
However, if the potential for an additional rate hike by the end of the year is discussed, the Australian dollar could surge against the greenback. The likelihood of this scenario is low but not zero. Specifically, experts from TD Securities believe that the risks of a rate hike are tied to rising real estate prices, which support consumption, and rising oil prices. Moreover, Bullock, who will head the RBA from September 18th, recently stated that Australia’s inflation is “still too high” and managing it will be a “top priority as head of the central bank.” She didn’t rule out further tightening of monetary policy in the future if primary inflation indicators start accelerating.
In other words, there’s a certain intrigue surrounding the September RBA meeting, so AUD/USD traders will likely proceed with caution. Significant price fluctuations are possible due to the greenback if the Non-Farm Payrolls surprise with a green or red color. If that doesn’t happen, the pair will likely continue trading in the 0.6450–0.6520 range.
The material has been provided by InstaForex Company – www.instaforex.com
Next week, on September 5th, there will be another meeting of the Reserve Bank of Australia (RBA), following which the regulator will decide the fate of the interest rate. However, there’s no intrigue regarding the formal outcomes of the September meeting. It’s highly likely that the central bank will keep the rate at its current level, as it did in the two previous meetings.
After publishing the report on the growth of July’s inflation, the chances of additional monetary policy tightening in September have virtually dropped to zero. The focus of traders will be on the rhetoric of the RBA’s accompanying statement and the phrasing used. If the central bank implies that the rate will remain at 4.1% in the subsequent meetings this year, the Australian dollar might face additional pressure. If, however, the regulator allows another round of monetary policy tightening, the Aussie might rally. It’s also worth noting that the September meeting will be the last one chaired by Philip Lowe. Starting in October, he will be replaced by Michele Bullock, the current deputy governor of the RBA.
At the beginning of this week, AUD/USD buyers attempted several times to break the 0.6500 target. However, they failed to secure within the 65-figure range, after which the pair got stuck in the price range of 0.6450–0.6520 (the Tenkan-sen line on D1 – the upper line of the Bollinger Bands indicator on H4). The pair alternately bounces off the borders of this corridor, reflecting the indecision of both buyers and sellers. Although, in essence, such dynamics primarily show the hesitancy of dollar bulls—the rise of AUD/USD is mostly due to the situational weakening of the greenback (consequently, impulsive drops are due to the situational strengthening of the U.S. dollar). The Australian dollar is currently not playing its own game and is being led, while the greenback is leading.
Yesterday’s Chinese macroeconomic data, which turned out to be relatively good, couldn’t support the Aussie. For instance, China’s PMI index for the manufacturing sector entered the “green zone,” rising to 49.7 (forecasted at 49.2). Although the indicator is still below the 50-point target, its upward trend has been noted for the third consecutive month. China’s non-manufacturing activity index fell short of the forecasted level (51.0 instead of the predicted rise to 51.3) but remains “above water.”
The Australian dollar essentially ignored this release (excluding a sharp impulsive spike). The AUD/USD pair dutifully follows the greenback, which, in turn, responds to the mixed news flow.
After the U.S. Department of Commerce downgraded its GDP growth estimate for the second quarter, and specialists from the ADP agency published disappointing data in the realm of the American labor market, the likelihood of a rate hike at the September Federal Reserve meeting dropped to 9%, and to 29% for the November meeting (according to data from the CME FedWatch Tool). The greenback reacted accordingly, declining across the board. However, the previous day turned out to be in favor of the U.S. currency. It was revealed that the core Personal Consumption Expenditures (PCE) price index in July rose by 4.2% year-on-year, following a two-month decline. Additionally, the weekly figure for the initial jobless claims entered the “green zone,” settling at 228,000 (the best result since late July). Following these releases, the probability of a November rate hike increased to 45%, while the September chances remain low (11%).
Against this backdrop of conflicting news, the U.S. dollar index has been oscillating, reflecting overall uncertainty among traders. Possibly, the August Non-Farm Payrolls might tip the scales one way or the other, but the report would need to surprise either positively or negatively. If the figures are as expected, major dollar pairs will continue their sideways movement awaiting the next key news driver.
Regarding the AUD/USD pair, there won’t be a long wait: the Reserve Bank of Australia (RBA) is set to meet again on Tuesday, September 5th. Recent inflation data in Australia suggests that the central bank will likely keep rates at current levels. Recall that the consumer price index in July rose by 4.9%, with a growth forecast of 5.2%—the indicator has been declining for three consecutive months, reaching a 17-month low. Considering such a result and the dovish tone of the previous RBA meeting’s minutes, it’s safe to assume that the regulator will maintain a similar stance in September, exerting slight pressure on the Aussie.
However, if the potential for an additional rate hike by the end of the year is discussed, the Australian dollar could surge against the greenback. The likelihood of this scenario is low but not zero. Specifically, experts from TD Securities believe that the risks of a rate hike are tied to rising real estate prices, which support consumption, and rising oil prices. Moreover, Bullock, who will head the RBA from September 18th, recently stated that Australia’s inflation is “still too high” and managing it will be a “top priority as head of the central bank.” She didn’t rule out further tightening of monetary policy in the future if primary inflation indicators start accelerating.
In other words, there’s a certain intrigue surrounding the September RBA meeting, so AUD/USD traders will likely proceed with caution. Significant price fluctuations are possible due to the greenback if the Non-Farm Payrolls surprise with a green or red color. If that doesn’t happen, the pair will likely continue trading in the 0.6450–0.6520 range.
The material has been provided by InstaForex Company – www.instaforex.com
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