The Australian Dollar had a strong week last week, recovering some ground against all the majors from the previous week’s losses on the back of poor local employment data. Most of these gains were not relating to local economic data but more so a reflection of poor data out of the majors and not so much a reflection on the Australian Dollar itself.
Today provides some of the most significant data for the week. The Reserve Bank of Australia Minutes for the month of August are released at 11:30, this will provide investors some guidance as to the thoughts of the RBA’s plan for the remainder of the year. The key points that analysts will be looking for are information on the inflation levels, unemployment and the potential for interest rate rises for the remainder of the year. Governor Glenn Stevens also speaks tomorrow before the House of Representatives, on the Standing Committee on Economics. The speeches of Governor Stevens are often a cause for currency movement as his is arguably the most influential voice regarding Interest Rates and monetary policy for Australia.
Reserve Bank of New Zealand release their 2-Year Inflation Expectation at 1:00pm which is had a previous result of 2.36%. This figure is the Reserve Banks expectations on how the price of goods will change annually during the next 2 years. Often expectation on future inflation can become reality as perception of a possible rise will lead to reaction prior to its actual occurrence.
With the commencement of the European session today we have Consumer Price Index (CPI) out of both the UK and the USA, an important market mover as a the leading indicator on inflation measured by the change in the price of goods and services purchased by consumers.
The UK is projected to reduce from the previous month from 1.9% down to 1.8%. A reduction in the inflation rate may cause further Pound weakness as it could provide substantiation that the speculated Interest Rate rise is further away than investors had hoped for. The GBP could be especially volatile on the basis of this CPI data after last week’s Bank of England Inflation Report where Mark Carney indicated that the BoE would not consider raising Interest Rates until the wage growth forecast returns to more acceptable levels.