Despite multiple efforts to shake loose the constraints of its now well-formed bounds, the Australian dollar was unable to conjure momentum in its own favor while strong employment and trade indicators bolstered expectations of another rate hike from the RBA before years end. Looking to this weeks economic schedule, the majority of the offerings will provide overviews of consumer earnings and sentiment. Starting it off in the later half of the week, Westpacs survey of consumer confidence for August should reflect the smattering of strong reports while also sifting in a few growing pains.
Likely the most supportive facet for optimists for the new month was the successively strong reports of employment. After two large net additions to the nations payrolls in June and July, the jobless rate has hit a fresh 30-year low 4.6%. At the same time though, consumers are still burdened by unyielding gasoline prices and the renewed matter of growing lending rates. Australians expectations for higher lending rates will further be clarified by the Melbourne Institutes measure of the subject the following day. Though no official consensus is currently offered on how consumers view levels of price growth in the coming months, there are more points adding to growing inflation than there is for cooling. While consumers have been liberally spending in the economy with earnings and employment funding such activity, they were instead most likely to source recent measures of quarterly inflation and the central banks decision to lift the overnight cash rate in validating their forecasts. Two weeks ago, the government statistics office reported annual inflation over the second quarter of the year soared to 4.0%, well beyond the 2 to 3% tolerance level. This leaves little doubt on how Australians are likely to have responded in the private survey. The other fundamental theme for the week will be wages. On deck are second quarter reads of average weekly wages and the wage price index. For all intents and purposes both gauges measure the same thing but from a different point of reference. Weekly wages for the three months ending in May have no consensus attached to the read, but with unemployment edging lower and companies scrambling to attract skilled labor to meet foreign demand, wages should naturally grow to reflect it. Similar reasoning is applied to expectations for the Wage Price Index for the quarter ending in June. Representing the firms side of the employment contract, wage costs could represent a significant source of inflation should companies try to pass on the higher costs onto consumers more willing to buy in. From a broader view, should inflationary pressures and domestic spending habits draw from these reads, it would contribute yet another sign pointing the RBA to another quarter basis point.
Last week produced perhaps the most fundamentally bullish lot of indicators the Australian economy has seen in some time, yet the currency was unable to turn the data into favorable spot movement. From the beginning of the period, it was apparent that Aussie figures would churn little a volatility. Though ANZs job advertisements read for July could be interpreted somewhat ambiguously as the 1.2% contraction for July could be a sign of firms filling their ranks or perhaps just firing current staff and not hiring, it was taking on a positive tone given the recent improvements in employment reads. Also, for the same day, the Cashcard retail index for July advanced 0.6% on the month with a large 2.9% annual pace. This was yet another figure suggesting domestic consumption was gaining over export strength in sustaining economic growth. Two strong reads, and the response a 50 point decline against the US dollar. Moving on in the week, Wednesday brought with it two June investment indicators home loans and investment lending. The results were mixed. Approvals for loans on residential projects rose 1.3%, slower than the previous month, yet the overall level marked a record 63,623. This was followed up by a 4.5% jump in investment lending for the same period, though it fell short of Mays upward revision to a 6.5% pace. Nonetheless, with lending finding support from wage growth and brimming confidence, the potential contributions to GDP were easily drawn. From this data a bid was lit under the currency to drive the AUDUSD 100 points to 0.7665 before finding temporary resistance. Oddly enough the rally couldnt subsist into the best indicators of the week released in the final two days. On Thursday, the July employment reads came out to surprising results. After Junes hefty addition of 53,700 jobs to the economy, expectations were reserved for the payrolls for the following month. However, employers took on 50,700 new hires as production capabilities could not keep up with demand for raw materials from trade partners like China and India. Furthermore, the filled out firm rosters led to a 4.8% jobless rate, yet another record on the books, while at the same time the participation rate jumped to 65.0%. Strong reads with a response of a currency decline. Finally, the trade figure for June wrapped up the week. Already expected to be cut nearly in half, the trade deficit instead shrank from A$2.219 billion to just A$733 million. This was largely due to a 22% jump in exports of metal ores and minerals with help from a 15% jump in shipments of mineral fuels. When all was said and down, the AUDUSD topped out at 0.7715, long before the strongest pieces of data for the week, and ended just pips from where its started.
