the Aussie (AUDUSD) has been stuck going kind of sideways for the last month or so. There have been plenty of ups and downs, but it seems the market needs something a little more convincing to break out of the range. Up until the huge tariff announcement in April, it seemed the Aussie (AUDUSD) was set to generally trend higher. Can it get back in that groove now?
The thing is, the Australian economy looked in quite good shape at the start of the year. This led to speculation that not only would the RBA keep rates elevated, but they might even go higher. Since then, the situation in China has deteriorated amidst the tariffs. And the domestic economy hasn’t been holding up too well.
The Export Nation
Australia does rely quite substantially on trade, obviously. So it was expected that the currency would tank when the trade tariffs were announced, and then recover once the moratorium was in place. The thing for markets now seems to be uncertainty. If the trade situation normalizes, then the Aussie (AUDUSD) has some ground to cover to catch up to where it would be now if it weren’t for the tariff worries. On the other hand, if trade deals are not negotiated, then the Aussie (AUDUSD) could turn back down again.
Key to understanding where this could go is a trove of economic data from the antipodean nation coming out this week. They all are expected to paint a picture of a struggling economy. But for traders hoping for a boost in the Aussie (AUDUSD) once trade considerations are resolved, they could show that a bounce-back is possible.
RBA and Growth
The first to come out is on Tuesday, with the RBA minutes becoming available. At the last meeting, Australia’s central bank decided to hold rates unchanged, as was widely expected. Some, however, were expecting even more easing, so the result was a bit hawkish as far as the market was concerned.
Now the focus will be on what happens at the next meeting, and whether back-to-back rate cuts are already being seriously considered. Although inflation remains above target, a slowing economy could bring it down faster than monetary policy can have an effect. This consideration could get the RBA accelerating its cutting pace.
No Lift Off in Sight
Speaking of which, Australia’s GDP comes out on Wednesday and is expected to post a quarterly growth rate of 0.5%. Although nothing to sneeze at, it’s slower than the 0.6% reported in the prior quarter. China has managed to keep importing raw materials despite the tariffs. But general pessimism in the economy can cause the GDP figure to start to deteriorate, and push the RBA towards more easing.
Australia’s trade balance comes out on Thursday, and is still expected to show a healthy surplus of $6.7 billion. The bigger the surplus, generally, the better it is for the currency. But, this is a bit lower than the $6.9 billion from a month ago. And traders will be looking at the mix of exports and imports to see if a surplus will likely grow or shrink in the coming months.
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