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Considering the shift in sentiment we’ve seen over the past couple of sessions, particularly with the USD retreating and retail sales coming in ahead of estimates, the pair would have been expected to get a kicker. However, there is always caution on the AUD heading into the RBA decision with the risk of jawboning quite high. While nothing much new is expected from the RBA today, any change in language/tone could cause a big move.
At 11.30 AEST we have June trade balance which is expected to show a $2 billion deficit. This reading will shed more light on how the economy performed in Q2. There will be a bit of activity around the region with India’s rate decision due out; given the significant interest generated by India in emerging markets post the election, this meeting will stir up a bit of interest.
We will hear more from the RBA when the latest statement on monetary policy (SoMP) is released on Friday, and Thursday’s jobs numbers will also be key for how the AUD trades this week. Should we get any shifts in language today, then the SoMP on Friday is likely to explain the rationale.
Cable facing a downtrend resistance
The pound gained some traction from the improving risk sentiment and better-than-expected construction PMI data. GBP/USD found some support in the 1.6800 region last week and seems to have generated some buying interest. Having said that, it is now approaching a downtrend resistance which has been in place since the mid July highs, and has capped the price action since. This line currently comes in around 1.6880 and is likely to be tested at some point in the near term. On the UK calendar we have services PMI due out with a solid improvement expected.