It’s not the most exciting week for local markets when it comes to data flow, but the release of both the RBA Minutes on Tuesday and the post-Budget Westpac Melbourne Institute Consumer Sentiment survey are going to be big for local traders and markets.
The RBA’s Statement on Monetary Policy, released a couple of days after this month’s rate cut appeared to have a clear, if mild, easing bias. Bill Evans, Westpac’s chief economist, wrote in his weekly publication the preparedness to ease was indicated by the statement in the SoMP that “the Board will continue to assess the outlook and adjust policy as needed”.
A reinforcement of this bias, if that’s what the Minutes show, is a risk for Aussie dollar bulls who took it up to test the bottom of the multiyear downtrend at 0.8160/70 last week in post-Budget euphoria. The rejection of this resistance, which also pulled the Aussie up after the initial break earlier this year, biases the AUD/USD lower again.
Indeed, while AUD/USD traders were certainly watching this technical level, and sold in front of it, any RBA statement or hint at easing, or not, will be important for this week’s price action. But even if the RBA does hint at easing, given the euro is back up toward 1.15, closing the week at its highest level since February, there is no guarantee the Aussie will fall. The US dollar, euro and global Forex market movements are just as important and beyond the control of the RBA.
The Westpac consumer sentiment survey is less likely than the Minutes to move markets, but is in many ways the more important release. Taken after the Federal Budget last week it will give the latest update on the impact of the new and improved budget on sentiment.
Of most interest, given that the budget measures largely focused on small business, is whether or not the controversary over the language around the paid parental leave has had any impact on consumer outlook for finances in the future. Equally important will be the response to questions about unemployment. Once consumers feel less worried about losing their jobs then we’ll know that confidence is both rising and that any associated spending that should go with that will flow.
Offshore, Chinese house prices on Monday will be interesting. Tuesday sees important inflation data in the UK, which will be watched closely by Sterling traders.
Wednesday sees the release of Japanese GDP and the Minutes from the last FOMC meeting. “Flash” PMIs are out on Thursday and China will be important. Chicago Fed National Activity index is out Thursday in the US and then German GDP and US CPI will round out the week on Friday.
And of course traders all over the world will be wondering if the bond market rout, and its associated risk to stocks, is over after Mario Draghi’s timely intervention, which saw prices reverse and yields fall sharply to close the week.
Here’s Westpac’s excellent diary of all the key events and data for the week.