Stuck in a sizable 150-point range against the benchmark US dollar, the Australian currency may be loosing the bullish momentum that has recently built up behind it with strong data and a rate hike. If data from the island nation cannot persuade bidding in the low liquidity of the Northern hemispheres summer months, then upward potential could fizzle long before another hike is materializes. Looking to the indicators that are on deck for this week, there will be offerings of reliable monthly figures as well as another round of second quarter numbers.
The Tuesday morning release of the leading indicators index compiled by the Conference Board is not likely to rouse much tradable interest. With reference to Westpacs gauge of the same data readily available, there will be little interest in the later release unless there is a sizable discrepancy between the two. Coming the following day, second quarter construction activity and July retail sales will provide a multi-dimensional look at spending in the economy. For the three months ending June, building is expected to have increased significantly as consumer confidence for the period runs off of rising wages and an unemployment rate that fell to a 30-year low. One hitch that may prove difficult for the this read however was the RBAs decision to lift the overnight lending rate to a five-year high 5.75 percent in May. Higher rates have already begun to shown its effects on the consumer and a turn in housing could be another red flag. Retail sales may one of those reads that is weighed down. Sales growth is expected to be cut in half to 0.5 percent for the month as higher wages and tax breaks had to compete with near record gasoline prices that acted as an open spigot on disposable incomes. Thursday follows up with private sector lending for July. Recently, both yearly and monthly reads have held pretty consistent, though Mays rate hike will likely start to wear down on the numbers and will further do so when the second rate hike in early August starts to crunch borrows. Also, due out the same day is private capital expenditures. In the first three months of the year, spending slowed to a 0.6 percent gain following the previous record 13.0 percent jump. Expectations for an 2.0 percent rise in the three months ending June may seem conservative hovering around 2.0 percent however as businesses increased spending on labor and equipment to keep pace with global demand. Finally, measures of manufacturing activity in August and the current account shortfall in the second quarter could offer the most relevant data for the week. Record crude prices forced factories to slow their pace in July. For the following month, energy prices hovered near record levels, borrowing rates were more expensive and China took steps to tame unprecedented growth and therefore demand. All this should keep the manufacturing below the 50.0 contraction/expansion level. Two hours later, the current account figure is expected to be little moved, which would follow suit with the slowly falling average of the goods and services deficit
With few market moving indicators available for support, the Aussie dollar struggled to build a steady base of support. In fact, the most beneficial day of the week had also lacked any data. Mondays session continued from Fridays bounce off of support around 0.7550 and eventually topped out 95 points later when Julys car sales numbers hit the wires. Auto purchases rebounded 2.6 percent, for the fastest increase in 18 months as consumer decided to overlook higher petrol prices in favor of tax breaks and higher wages. Though this indicator was better than the market had anticipated, its currency effects were slight at best. The following days Leading Economics index from Westpac garnered a little more interest though. Junes leading component rose 0.8 percent while the coincident read advanced 0.5 percent, revealing a healthy economy and expected strength for the coming six to nine months. Adding a note of ambiguity to the data mix, the DEWR skilled vacancies report contracted for the fourth consecutive month as employment reached its level since 1976. While this is a complementary indicator of labor strength, it could also be indicative of fewer jobs available should more Australians enter the labor force looking to take advantage of the strong employment trends. As the data cooled on the newswires the AUDUSD was able to jump to 0.7670 for a quick touch before trading back for the rest of the week. The subsequent decline was seemingly unfounded give the final set of data though. Second quarter housing prices accelerated 3.1 percent over the three months, the biggest increase in two and a half years. Once again, the data offered was a derivative of a wealthier consumer, but two rate hikes had already marred expectations for the future. By Friday, the move higher proved an unsustainable swing as prices came right back down to the 0.7550 support level, putting more pressure on the coming weeks numbers to pull the pair off of its range low.
