– Latest US employment figures to boost the odds of an Interest rate hike?
– The RBA maintain Interest rates at 1.75% at its June meeting
– Key Chinese, US and Australian data may impact the Aussie Dollar
A number of economic releases to impact the Aussie Dollar
The RBA’s efforts to cut rates may well be put to the test next week with a number of major economic releases for Australia, US and China. On Tuesday the Consumer Inflation Expectations are to be released, with expectations for inflation to return to 3.2% over the course of the next 12 months.
Although these releases are not based on data they do provide consumer confidence in the economy, and consumer confidence generally equates to better spending.
Unemployment Rate and Employment Change
On Thursday employment data will be released for Australia which is likely to be volatile period, the link between low employment rate and inflation has been noted for many decades and I expect data to be positive given how the last 3 releases have outperformed expectations.
The only constraint in question relates to Chinese data and the economy as a whole although Chinese central bank Chief economist forecasts growth of 6.8% for the economy.
A handful of Chinese economy releases next week, such as retail sale figures and Industrial production could provide further hints to how well the Chinese economy is performing.
US Data and the outstanding Interest rate hike
Generally speaking, a weaker US Dollar makes commodities cheaper and therefore commodity currencies perform better when the US Dollar is weaker.
I suspect that as we approach the US presidential election, the odds of a hike will decrease which could well weaken the currency making Australian exports more attractive.
On Tuesday we see the release of US retail sales as well as import and export pricing indexes. These are core releases that Yellen of the FED will look to in her next Interest rate decision. US data has been leaning towards a more positive trend albeit poor Non-farm payroll figures last week.
If data were to come out worse than expected I believe that the US Dollar will weaken and the odds of a hike will further diminish. This may well be good for the Australian Dollar since most commodities are priced in US Dollar.
Investors will look to the following week’s RBA meeting for an update on the Interest rate cut decision which will give a better overview for economic outlook. There may well be further Interest rate cuts on the horizon unless the RBA are able to stabilize low inflation back to the 2-3% expectations.