Australia has avoided recession up to now. This week’s GDP could prove otherwise. In addition, a new interest rate and 3 more major events await the Australian dollar: Retail Sales, Building Approvals and Trade Balance. After AUD/USD reached 0.80, here are the things to look for this week.
Australia arguably has the strongest economy in the Western world. With GDP declining only once, a very high interest rate and robust trade with China, Australia doesn’t suffer too much from the global recession.
This week, 5 major indicators could set the direction of AUD/USD: Will it continue the upward trend? Or will it lay low?
- Retail Sales: This major indicator for the internal consumer mood in Australia is expected to remain positive, and rise by 0.5%, less than last time, but still strong. It’s published very early, at 1:30 GMT on Monday, while most traders are still enjoying the weekend. Despite it’s big importance, the early hour could weaken movements unless it’s a big surprise.
- Building Approvals: This is a good indicator for future economic changes in Australia. Also here, expectations are positive, at 2.1%, but shy of last month’s 3.5%. This figure is published on Tuesday at 1:30 GMT. Also here, the importance of this figure is overshadowed by the next release, which is much more important…
- Interest Rate decision: Australia has a Cash Rate of 3% – the highest in the West. The RBA has already surprised forex traders with its decisions, and sometimes defiance. The market expects no change for the interest rate. As in other places, the focus will move to the accompanying RBA Rate Statement. No Quantitative Easing is expected by the RBA. What’s important is the wording: optimistic or pessimistic. Or in other words: will there be rate cuts along the road, or maybe rate hikes? Answers on Tuesday at 4:30 GMT.
- GDP: As aforementioned, Australia has avoided recession up to now. Recession means two consecutive quarters of contraction. The Australian economy squeezed for the first time in the last quarter of 2008. It began late. Economists are pessimistic – they’re expecting a fall of 0.2% in GDP in the first quarter. After last quarter’s 0.5% fall, this means recession. If Australian avoids recession, the Aussie will fly up. Watch for big moves on Wednesday at 1:30 GMT.
- Trade Balance: Last but not least, Australian Trade Balance is predicted to show a surplus of 1.7 billion, smaller than 2.5 billion last time. Australia is dependant on commodity exports, especially to the Chinese giant. China’s stimulus plan proved successful. Will this influence the Australian Trade Balance? Answers on Thursday. Yup, at 1:30 GMT yet again.
These are the key events for the Aussie. The outstanding performance of the Australian economy is seriously tested this week. I feel that 0.80 is far from the end, and that AUD/USD can go much higher.
For further reading:
- An overview of the week’s major events, check out the Forex Weekly Outlook.
- Trading cable? Here’s a special coverage of this week’s major events in the British Pound: Britain’s Got Talent.