Summary:

  • RBA minutes along with deputy governor comments don’t make the AUD much weaker
  • A package of China macroeconomic data shows a miss in fixed asset investments and retail sales
  • The yield on US 10Y Treasury gets back above 3% buttressing the buck in the morning

Moves across the currency space have been quite benign of late, and currently the Japanese yen along with the NZ dollar are the worst currencies within the G10 basket. On the other hand, the Australian dollar is trading just a little lower despite a torrent of dovish comments coming from the RBA minutes as well as Guy Debelle’s speech. The reason? Market participants may have already accustomed to that kind of words. The document reiterated that the next move in rates is likely to be up rather down highlighting that an appreciation in the AUD would slow expected acceleration in growth and inflation. The bank admitted again price growth is going to remain low for some time given retail competition, slow wage growth (the data on wages is due later this week). Do notice policymakers keep underlining wage growth is anticipated to pick up gradually mainly due to the labour market tightness therefore if this week reading beats expectations it could take us a notch closer to a rate hike, though not too much to be honest (some Australia-based banks are now scrapping their calls as for a hike in 2019).

Yet before the minutes we were offered headlines from deputy governor Guy Debelle’s speech regarding the outlook for the Australian economy. More or less they matched remarks put in the minutes as he stressed there is no a strong case for a near term rate rise, but if the economy evolves as expected, higher rates are likely to come. Debelle reckons that holding cash rate steady would help reduce unemployment, increase inflation over time – the latter has yet to show convincing evidence of growth though. As many central bankers around the world (those who share a bit more dovish stance) underlined there could be a need to see the jobless rate lower that it is in order to spur higher wage pressure. Probably he wanted to emphasis in a way that GDP growth is unlikely to speed up from the current levels saying neither economy could grow much above its trend in the longer-term. To sum up, neither the minutes nor Debelle’s remarks influenced the AUD noticeably suggesting that AUD traders are already used to such comments pushing back their anticipations with regard the first rate hike (as for now the interest rate market sees the first move in May 2019).

link do file download linkAnyway, the EURAUD looks as if it would be eager to climb in the near-term as the US dollar has gotten back a little of its appeal in the aftermath of a US yields rise. Technically speaking the cross could be able to move toward 1.6140, and this scenario could be questioned once the pair breaks through 1.5770. Source: xStation5

Meanwhile, the US dollar has recovered somewhat from its yesterday’s quite poor beginning to the week. The rising US yields have come to help as the yield on the 10Y Treasury moved above 3% in the morning. Over the Asian session we got a bunch of Chinese data (monthly readings) which were mixed. Admittedly, industrial production beat forecasts coming in at 7% yoy in April we cannot see the same in retail sales or fixed asset investment. The former increased 9.4% yoy missing the consensus at 10% yoy while the latter grew 7% falling short of expectations at 7.4%. Moreover, private sector fixed-asset investment rose 8.4% making a noticeable slowdown from 8.9% seen in March.

link do file download linkJust industrial output increased its pace of growth last month in the Chinese economy. Source: Bloomberg