The Australian economy has little data out this week. With are only three major releases due out, exchange rate movement will need to rely on overseas data and announcements.
Tomorrow Deputy Governor Philip Lowe is making an announcement. Deputy Governor Lowe is responsible for advising Reserve Bank Board members on the nation’s key interest rate levels. Typically he will drop subtle clues on future monetary policy. Currently the AUD/USD exchange rate is sitting at uncomfortable highs according to the Reserve Bank. The RBA’s desire for a lower exchange rate, in order to help Australia’s exporters increases the chances of Deputy Governor Lowe’s announcement taking on a bearish tone.
Construction work in Australia has recently taken a hit over the last 12 months and the figure out tomorrow is expected to remain at contractionary levels. Last quarter’s figure was -0.2% and this month’s figure is expected to worsen to -1.2%. The figure is important as it is a variable that typically affects the larger release next week, Australia’s Gross Domestic Product (GDP). The current GDP figure is relatively weak and the Construction Work figure may push the final GDP figure further in to the red.
Private Capital Expenditure is expected to be released Thursday and the expectations are, again, not overly positive for the AUD. Last quarter’s figure fell into contraction at -2.2%, and this month’s figure is expected to be released at -2.3%. The figure is an early indicator of future economic activity; therefore if the release remains in contraction, other economic indicators such as Hiring, Spending and Earnings should remain flat.
The G7 Meetings kick off in Germany this Wednesday; the meetings are expected to have some influence on the currency markets as they discuss global policies to attach incentives and disincentives to certain activities such as global warming and global financial stability. The meetings are expected to run until Friday, which may cause more volatility to finish off the week.