Australian Dollar (AUD) Set to Move Following Local Data Releases Today

The Australian Dollar (AUD) is expected to be quite volatile today due to a number of significant domestic economic releases taking place.

Yesterday the Australian Dollar (AUD) fell by approximately a quarter of a percent against a basket of currencies, despite the AIG Performance of Manufacturing Index being an expansion reading of 50.4, New Home Sales growing by 0.5% and ANZ Job Advertisements by 2.2%. The ‘Aussie’ (AUD) did however push up a by over 0.25% against the ‘Kiwi’ (NZD). A higher degree of movement to the AUD is expected today, following the high-tier economic data being released out of Australia.

The Australian Trade Balance for June will be released in today, with the expectation being that imports will outweigh exports to the tune of -3.0B, after clawing back some on the trade deficit last month to sit currently at -2.75B. The Retail Sales figure will be released simultaneously with the Trade Balance at 11:30 AEST. The market is expecting to see slightly improved growth to this sector, with a print figure of 0.4% expected from the 0.3% previous reading.

The Reserve Bank of Australia (RBA) will announce their August Rate Decision today at 2:30pm AEST. The forecast is that rates will again be on hold at the record low Official cash rate (OCR) of 2.0% after being cut by 25 basis points on two occasions earlier this year. A hold to rates again this month might provide the AUD with a temporary lift if the accompanying statement by Glenn Stevens, head of the RBA, contains positive comments about the effect of the recent interest rate cuts.

Further volatility surrounding the Australia Dollar is likely to occur later this week with the release of Australian employment figures. The Unemployment rate is expected to rise from 6.0% to 6.1%, with a modest 10 K jobs forecast to be added to the economy for the month of July. Any deviation from the forecast will determine the direction that the AUD moves, with a drop or hold to the Unemployment rate giving rise to the ‘Aussie’ (AUD) and an increase to the Unemployment rate set to weigh down on the currency.

Australian Dollar to New Zealand Dollar (AUD/NZD) Exchange Rate Likely to Remain Volatile This Week

The AUD/NZD exchange rate has experienced major swings over the past month, trading above 1.14 at the peak and as low as 1.09. The AUD/NZD rate actually fell after the Reserve Bank of New Zealand (RBNZ) cut interest rate by a further 25 basis points in the latter half of July due to market factoring in a half a percent expected cut by the governing body. It has since recovered to trade at 1.1080 at 0900 AEST.

Today’s Australian economic data results will certainly impact the AUD/NZD exchange rate in what is shaping up to be a highly volatile few days for the currency pairing. Tomorrow the New Zealand economy will report on employment conditions, with the expectation being an increase to their unemployment rate from 5.8% to 5.9%. If the forecast comes to fruition, the AUD/NZD exchange rate could push back up to the 21 month high that we saw early last month.

The Australian Performance of Service Index and Chinese Purchasing Managers Index (PMI) will follow on from the New Zealand employment figures tomorrow which will also be influential to the AUD/NZD exchange rate prior to the Australian employment data on Thursday.

Terry Finn