It was a big day of economic releases out of the Australian economy yesterday, commencing with the release of Retail Sales and Trade Balance figures in the morning and the Reserve Bank of Australia’s Rate Decision in the afternoon. The overall result of the data caused a minor appreciation in the value of Australian Dollar. This trend continued overnight, with the AUD extending its’ gains against most of the majors, with the exception being the NZD.
The Retail Sales result for the month of September was better than expected, coming in at 1.2% with the forecasted figure being a moderate 0.3% increase on the previous month. The Trade Balance for September however, indicated that imports once again heavily outweighed exports to result in a Trade Balance figure of -2261M, a few hundred million more than the expectation of -1850M. The negative trade Balance reading outweighed the positive Retail Sales reading and the AUD dropped by approximately a quarter of a percent following the announcement.
The ‘Aussie’ recovered during the lead up to the RBA Rate Decision and accompanying statement by Glenn Stevens, Head of the RBA. As expected, the RBA kept the cash rate on hold at 2.5%. Governor Stevens speech suggested that “the Australian Dollar remains above most estimates of its fundamental value, particularly given the further declines in key commodity prices in recent months.” Despite this reference to the AUD still being over-valued, investors responded positively to overall tone of the speech and the AUD moved up by over a quarter of percent against most of the majors.
Last night the US released their Trade Balance figure for the month of September and the forecast was a reading of -40.2B. The printed US Trade Balance figure was -43.2B causing the AUD to make further gains overnight against the USD. The UK released their Construction PMI which was an expansion figure 61.4. Although it was an expansion reading, it was still lower than the economic expectation and also allowed the ‘Aussie’ to make further positive movements against the Pound.
This morning New Zealand released their official Unemployment Rate which dropped to 5.4 from 5.6%. The result was better than expected from the New Zealand economy, causing the New Zealand Dollar to have a sharp spike in its value, eliminating the gains that the AUD made yesterday and causing to AUD to NZD exchange rate to fall by over half a percent in comparison to the same time yesterday. Chinese Composite PMI and Services PMI for the month of October will be a key influencer in determining which way the AUD will move today, with the next key economic event out of Australia to be released tomorrow.
Australia will report on current employment levels in the form of the Employment Change figure and Unemployment Rate at 10:30am AEST tomorrow. The forecast is that the Unemployment Rate will remain unchanged at 6.1%, with a modest 10K jobs add to the economy for the month of October. Any deviation from the expectation of this key economic indicator has the ability to move the AUD. An increase to the Unemployment Rate and a negative Employment Change reading will drive down the ‘Aussie’. Conversely, a reduction to the Unemployment Rate and a higher than expected Employment Change is likely to cause the AUD to make big gains.