For the week, the underlying Aussie major was left in consolidation, trapped in a 50-pip range as the market continued to speculate on the most recent Reserve Bank of Australia decision and the US employment picture. Now with both out of the way, bulls look to have taken over the landscape as the price action has broken through the 0.7400-0.7450 range, trading higher at 0.7517 heading into the weekend. The momentum is likey to keep pace next week even as the full schedule of events offers a glut of dimension to the underlying price.
Starting the week off, focus will turn to the National Australia Banks business survey following the much lesser noticed ANZ job advertisements and home loans report. Last month, according to the NAB business survey, business confidence dipped slightly lower on higher fuel costs and in light of tax cut legislation. The confidence index of the suvey visual declined by two index points as the conditions component slipped. However, conditions still are moderately uptrending and should be reflective of the current stabilization in production as the economy expands. Further optimism should be boosted by the results of the Westpac consumer confidence report, set for midweek action. Although declining by 0.5 percent to a 103.8 reading, the report is likely to reflect current optimism as opposed to year out results. Noted in the previous report, consumers are feeling relatively happy with their current financial state but remain cautious of the future. The same setiment should be echoed in the current report, so long as higher rates have not dampened domestic spending. Rounding out the week will be the attention getting employment report and trade balance data. With the labor market remaining tight, the market will want to see sustained growth without an immediate pullback in the overall labor force. However, in the case of further additions to the employment landscape, expect traders to side with an inflationary bias on prospectively higher wage increases.
Comparatively taking a look back, data was short but sweet for the Aussie. Starting things off, the Reserve Bank of Australia kept rates at the current 5.75 percent. The decision was widely unsurprising as the market had already priced in the imminent decision following the recent 25 basis point rate hike. However, sentiment is now siding with a possible 25 basis point rate hike in the month of August as wage price pressures remain a prime component of current inflation. The decision was boosted by the performance service index. According to the AiG Service index, reported by the Australian Industry Group/Commonwealth Bank, services activity rose 3.3 points to a 52.6 from the previous months 49.3 print. A mild recovery, activity expanded in seven of the nine sectors in the month of June as concerns over higher fuel costs and interest rates abated. The positive report led right into the Cashcard retail index for the month of June. According to Cashcard, retail activity rose 0.4 percent on the month as consumers came out of hiding. The increases came on the heels of consumer tax legislation that returns above A$40 a month to a person averaging weekly earnings of A$56,000. The legislation becomes even better as earnings of at least A$150,000 will have an annual tax bill cut of 11 percent. Simply this translates into more money for the consumer in adding to overall economic growth.
