By Expert Panel 17.06.2013
By Chris Tedder, Research Analyst, Forex.com
The Australian dollar’s spectacular fall against the USD dollar over the last couple of months has intensified speculation that a deeper correction may be around the corner. A slew of events and data releases this week may provide fuel for a pull-back or quicken the pair’s decent.
The big event is the FOMC’s meeting which concludes on Tuesday. Rumours suggest the aim of the meeting will be to calm the market. However, if the bank lets slip that it’s planning on tapering asset purchases sooner rather than later (consensus estimates seem to be around the end of Q3/Q4), then money may scramble into the USD dollar. The Fed is unlikely to be so direct, thus the market will likely be closely monitoring the tone of the bank.
In the event that the Fed remains close-lipped, the market’s focus will shift to US build permits, CPI, unemployment, home sales and manufacturing data, which may provide the investors with further guidance on when the Fed may start to wind down asset purchases.
On the AUD side of the equation, the release of the RBA’s meeting minutes tomorrow will provide investors with an insight into the thought processes of the RBA. In saying that, we aren’t expecting the bank to deviate very far from what Governor Stevens said after the bank’s rate decision earlier this month, where he reiterated that growth remains a bit below trend and the effects of previous easing is still finding its way into the real economy. He added that the inflation outlook may provide scope for further rate cuts if needed to stimulate demand and the exchange rate remains high despite its recent fall.
Later in the week, China’s private sector manufacturing PMI will be a key event for the Australian dollar. Disappointing data out of the world’s second largest economy has raised concerns about the ability of China to focus on domestic demand, thus further disappointment may weigh on the Australian dollar. Current expectations are for HSBC’s manufacturing PMI to improve slightly to 49.4, which is still in contraction territory.
Note: it’s also worth keeping an eye of China’s foreign direct investment data out tomorrow (exp. Prior 1.5% ytd/y)