After six weeks of declines, which brought AUD/USD from 0.7790 to 0.7450, the pair finished last week higher, indicating a possible end to the long downtrend. The coming week holds important data, although light, in keeping with the economic release slates for the past two weeks. Among the key indicators are Monday's May retail sales release and TD Inflation gauge, and Tuesday's key Reserve Bank July Policy-Setting Meeting.
Retail Sales are expected to post a 0.2% rise after April's 1.4% increase, suggesting further growth in the Australian domestic market, even as the rate slows. Inflationary pressures may also be on board leading into the RBAs early week meet. While domestic spending is expected to trail off, price boosts from gasoline receipts could be more than enough to fill the gap. However, with mixed economic data over the past month, Australian rates are expected to stay at 5.75% amidst global tightening. At the last policy meeting, members discussed the development of economic trends worldwide and regionally. The recovery in Japan has been a major source of optimism for export-heavy Australia, which has felt some of the negative effects of the Japanese economic struggles of the twenty first century. Aussie traders will continue to keep a close eye on commodity prices in the coming weeks as a rally from the current downtrend could be facilitated or stymied by fluctuating prices. Copper, gold and other commodities have experienced retracements in the past weeks which threaten the export-heavy economy of Australia. On the other hand, if recent bounces higher prove to be more than just passing, another wave of export and manufacturing led growth could be in store.
There was little data to support a positive or negative bias in the Australian dollar last week, but the little economic data on the docket came in positive. The Conference Boards read of April Leading Index reported a respectable 0.3% gain. The measure is an indicator of growth expectations for the next three to nine months and shows positive bias for the rest of the year. Job vacancies remained level at 7.3% after April's hefty upward revision from 4.7% to 7.3% Cutting off the light economic flow early, the private sector credit reads for May showed little changed from the previous months level. Month over month, consumer credit grew 1.1%, while the annual measure advanced 14.1%. The real action, like in most currencies backed by the US dollar, happened at the end of Thursday and into Friday. After the rate hike from the Fed, the Aussie unit was released from its tepid decline, to post a 180-point drive over the following 24 hours. Not only was the cross currency bearishness a boost for the currency, a strong response in commodity price action on the same news helped to leverage the units rise. Gold prices jumped nearly $25 per ounce overnight, while copper and crude contracts responded in kind. In the end, the AUDUSD ended the period below 0.7450 support, at 0.7429.
Al Bawaba
