With the RBA on the sidelines, could positive domestic data support the aussie? – Forex News Preview
June 12, 2023 10:25 am
With the hawkish RBA paving the way for the remaining central banks that hold their respective meetings this week, the focus domestically turns to incoming data releases. Could the aussie bulls feel confident in continuing the recent rally against the US dollar towards the 0.6797 area?
RBA rate hike still impacting market sentiment
Last week’s surprising rate hike announcement by the RBA has been reverberating everywhere. The BoC was the first one to follow on the RBA’s path with a 25 bps rate move, as the market is getting ready for the troika of central bank meetings this week. The Fed, the ECB and the BoJ create a powerful mixture, but the Fed gathering stands out as a rate hike decision there would produce the loudest bang. The issues faced by the biggest developed economies are more or less the same, but as the RBA highlighted in its recent press statement, the household sector remains the key concern.
Domestic surveys in the spotlight
Zooming in to Australia and this week the calendar is focused on surveys and the labour market. On Tuesday, we will get the volatile Westpac consumer sentiment and the NAB business confidence survey. These releases will be closely monitored by the RBA as a negative set of prints could give birth to second thoughts regarding the latest monetary policy actions. Lowe et al understand the need for higher rates as inflation remains out of control, but they acknowledge the pain faced by households and appear ready to pause their rate hikes.
One of the key worries for central banks is the possibility of elevated inflation becoming entrenched in consumers’ minds. With the “monthly” CPI for April coming in hotter than anticipated, both the RBA and the market would monitor the MI inflation expectations survey that will be released on Thursday. At 5% it remains well above RBA’s tolerance level, and it is apparently feeding wage expectations.
Negotiations for the public sector workers’ pay increase have broken down as the unions have rejected the government’s 4.5% pay bump offer, sounding the alarm at the RBA halls. With the unemployment rate stuck at extremely low levels and employment seen recording another 17k jump on Thursday, there is a mounting risk that the stronger salary increases will further fuel the domestic inflationary pressures.
AUDUSD recovery depends on the Fed
The goodwill from the RBA announcement continues to prop up the aussie against the US dollar. The 5% rally from the May 31, 2023 low is very important from a market sentiment perspective as this pair has returned inside the rectangle that has been dominating the price action since February 24, 2023.
Developments in the US will probably drive this pair during the week, especially if the Fed surprises with a rate hike or adopts a more hawkish stance going forward. In this case, aussie/dollar could quickly reverse last week’s upleg and potentially stage another bearish breakout. On the other hand, a quiet Fed meeting along with a strong set of surveys in Australia, particularly the consumer sentiment surveys, could provide another confidence boost to the aussie bulls and thus increase the chance for a retest of the 0.6797 level.
With the hawkish RBA paving the way for the remaining central banks that hold their respective meetings this week, the focus domestically turns to incoming data releases. Could the aussie bulls feel confident in continuing the recent rally against the US dollar towards the 0.6797 area?
RBA rate hike still impacting market sentiment
Last week’s surprising rate hike announcement by the RBA has been reverberating everywhere. The BoC was the first one to follow on the RBA’s path with a 25 bps rate move, as the market is getting ready for the troika of central bank meetings this week. The Fed, the ECB and the BoJ create a powerful mixture, but the Fed gathering stands out as a rate hike decision there would produce the loudest bang. The issues faced by the biggest developed economies are more or less the same, but as the RBA highlighted in its recent press statement, the household sector remains the key concern.
Domestic surveys in the spotlight
Zooming in to Australia and this week the calendar is focused on surveys and the labour market. On Tuesday, we will get the volatile Westpac consumer sentiment and the NAB business confidence survey. These releases will be closely monitored by the RBA as a negative set of prints could give birth to second thoughts regarding the latest monetary policy actions. Lowe et al understand the need for higher rates as inflation remains out of control, but they acknowledge the pain faced by households and appear ready to pause their rate hikes.
One of the key worries for central banks is the possibility of elevated inflation becoming entrenched in consumers’ minds. With the “monthly” CPI for April coming in hotter than anticipated, both the RBA and the market would monitor the MI inflation expectations survey that will be released on Thursday. At 5% it remains well above RBA’s tolerance level, and it is apparently feeding wage expectations.
Negotiations for the public sector workers’ pay increase have broken down as the unions have rejected the government’s 4.5% pay bump offer, sounding the alarm at the RBA halls. With the unemployment rate stuck at extremely low levels and employment seen recording another 17k jump on Thursday, there is a mounting risk that the stronger salary increases will further fuel the domestic inflationary pressures.
AUDUSD recovery depends on the Fed
The goodwill from the RBA announcement continues to prop up the aussie against the US dollar. The 5% rally from the May 31, 2023 low is very important from a market sentiment perspective as this pair has returned inside the rectangle that has been dominating the price action since February 24, 2023.
Developments in the US will probably drive this pair during the week, especially if the Fed surprises with a rate hike or adopts a more hawkish stance going forward. In this case, aussie/dollar could quickly reverse last week’s upleg and potentially stage another bearish breakout. On the other hand, a quiet Fed meeting along with a strong set of surveys in Australia, particularly the consumer sentiment surveys, could provide another confidence boost to the aussie bulls and thus increase the chance for a retest of the 0.6797 level.
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