After nearly two weeks of solid rally, the Australian dollar was finally set off its pace, unusual for this past week given the Reserve Bank of Australias decision to raise the countrys overnight cash rate. Perhaps the coming weeks numerous indicators will finally be able to shake the currency to life as support behind another rate hike within this year builds.
Starting the week off strong, indicators of retail trade, job listings and foreign reserves will offer a well-rounded picture of the Aussie economy. The Cashcard retail index, a leading indicator to the official retail sales figure, has no official consensus attached to it. The previous months governmental read of a surprise 1.0% jump could be a sign however as confidence was buoyed by easing gas prices and the consistently low jobless rate. Due just a short time later, ANZ job-advertisements for July will likely be overlooked as it is typically an ambiguous read for labor market health. On the other hand, should an increase in ads would likely be a healthy indication that employers are finding it hard to attract skilled labor and would in turn have to raise wages to further fight off capacity restraints that are hanging over production numbers. Tuesday, the only indicator for assimilation into the market place will be NABs business activity figure for July. As last weeks services and manufacturing PMI numbers reported declines in July, expectations for the same in the overall business gauge would not be far off base. The following day will bring with it gauges of lending and home loans for June, which should reveal the effects of Mays rate hike in the benchmark rate to 5.75%. With another hike in August, mortgages and other lending issues should certainly feel the depressing effects of more expensive rates. The final two days of the week will certainly produce the most market impact in its scheduled indicators. Thursdays data will revolve around Julys employment figures. With other major nations reporting a decisively reduced pace of hiring for the same month, Australian employers are expected to join the trend. A market consensus for a meager 5,000 Australians added to the payroll would be the result of managers responding to higher costs from record-setting energy prices. Finally, to wrap up the week, traders will be offered nations goods and services trade account. A vital component of a large export nation, Junes trade balance is expected to have been effected by Chinese GDP that soared to 11.3% in the second quarter as well as a consistently high value for the nations domestically mined commodities.
Looking back to last week, price action in the Australian dollar seemed to detach itself from the fundamental indicators coming out of the country. Undoubtedly the main event for the week rested with the RBAs monetary policy meeting on Wednesday, but its market moving status was already tempered by the fact that a hike was heavily favored. Instead, traders were focusing on the economic relevance of the weeks remaining indicators that would substantiate the health of the economy while also contributing to speculation over the possibility of another rate hike before the years close. Mondays data was unsupportive of another rate hike. While the proprietary TD Securities measure of July inflation jumped to an annual 3.5% and private sector credit for the month before climbed a greater than expected 1.2%, the days third release pointed in a different direction. According to the Housing Industry Association, sales of newly built homes plunged 10.5% in June to a 17-month low. Officials say the disappointing figure was almost exclusively the result of high lending rates, which had received additional burden from a rate hike just the month before. Traditionally, new home sales are a leading indicator for the rest of the housing market; and when it slows, it often precedes a contraction in consumer spending and inflation. Tuesday sized up to be little better. While growth in building approvals for June bested expectations, it had still contracted from the month before. The real bearish figure for the day however was the AiG manufacturing index. The survey reported in at 49.7 for July, for the seventh contraction in the industry in the past year. On Wednesday, Aussie bulls finally had a reason to cheer when the central bank announced it would tack on an additional quarter percent to the benchmark-lending rate and the Bureau of Statistics reported a jump in retail sales. While the retail figure was unexpected, the RBA decision was. Already highly favored, a hike was instead interpreted in terms oh how it would effect the economy which was showing signs of an impending slump in business and housing growth. This dour outlook was only confirmed the following day when Julys AiG services performance reported its own decline. Representing fully two-thirds of the economy, services barely grew for the month according to the 50.4 figure. Already on the cusp of a contraction, with the rate hike in the beginning of the month, services-based companies are likely to feel the pinch in consumer spending going further. Through the week, the Aussie dollar held a 100-point range while finishing the week off near 0.7650 - only 20 points from where it started.
