AUD rising heading into the RBA decision

AUD/USD got off to a fairly good start this morning, gapping higher at the open despite a subdued risk tone.

This rise suggests investors are generally happy with the PMI print or they are pricing in a less dovish RBA. While China is closed we will still be getting data from there, with non-manufacturing PMI due out at 12:00 AEDT today. In Australia we had building approvals and ANZ job ads at 11:30 AEDT and we still have commodity prices due out at 16:30 AEDT. Building approvals came in at a much worse than expected -2.9% (versus -0.3% expected) while ANZ job ads fell 0.3%. While we would have expected to see a slide in the AUD, traders continue to take advantage of the dips at the moment.

Tomorrow we have the RBA decision where analysts are wondering if the RBA can convince markets that the AUD should slide further. With the recent AUD depreciation already translating through to higher inflation for Australia, chances of any aggressive action by the RBA may have sharply diminished. Analysts have argued recent AUD weakness was more a function of China pessimism than RBA dovishness.

That recent spike in CPI/inflation data has really made the situation tricky for the RBA. While rates are expected to remain on hold tomorrow, the commentary will be every interesting. Should the current momentum continue in the near term, I will be looking out for a move to resistance in the 0.882 region. Apart from the RBA we also have retail sales and trade balance data due out this week.

On the USD side of the equation, Fed members speaking this week will be Charles Plosser (voting member) along with Lacker, Evans, Lockhart and Rosengren. US jobs will also be back in focus with non-farm payrolls due out on Friday. There will be a strong focus on whether the last reading was indeed seasonal and of course if we can see a strong bounce back.

The emerging markets complex will also be in focus, particularly for the risk currencies. This week we have Indonesia GDP, a preliminary Q1 GDP reading for India and the Philippines central bank decision. These readings will help the global investment community gain further insight of how deep this current emerging market crisis is.


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