This week article covers topic such as UK GDP, market-moving risk events and RBA and RBNZ policy decision.
RBA MONETARY POLICY DECISION-AUD
RBA August policy decision opens a first promising trade opportunity of this week. The market expects the RBA to leave policy unaltered with the cash rate remaining @1.50%. According to ASX features, the chance for the rate hike is low. However, notes that the more interesting development this week will likely be the RBA’s Statement on Monetary Policy. Therefore, any clear bias from the RBA could guide AUD sentiment leading into the RBA’s Statement on Monetary Policy on August 10.
If RBA provides a solid tone means, the AUD will remain stable in the market; if it dovish tone means AUD weeken in the market.
If the trade war remains focused, they will likely overshadow the RBA changes and lead to AUD negative.
Wednesday AUG 8
RBNZ MONETARY POLICY DECISION-NZD
The quarterly policy statement and this month policy decision yet has to release; Regarding their policy decision, market expectations are for the Official Cash Rate to remain unchanged at 1.75%.
If the RBNZ shift from their current neutral tone and become more hawkish, the market may bring forward its rate hike expectations. This should support NZD, presenting an NZD long opportunity. Conversely, if the RBNZ stand low the market will likely push rate hike expectations further back. This will likely weigh on NZD, presenting an opportunity to go short.
FRIDAY AUD 10
Exclusive Friday for fundamental trader's.
RBA POLICY DECISION: As we discussed above, the AUD price movement depends on the report.
UK GROSS DOMESTIC PRODUCT-GDP.
The UK’s GDP release will consist of the preliminary estimate for Q2 and the new monthly GDP release for June. Apart from that, Brexit developments will be key to GBP sentiment and its fundamental outlook. With the Brexit deadline less than eight months away and progress remaining stubbornly slow, Brexit will become an increasing concern for the outlook of GBP
we expect Brexit developments to overshadow UK data and the UK’s monetary policy outlook going forward.
If Brexit developments prove positive, GBP should remain overall well supported. Conversely, if Brexit developments are negative or the outlook remains bleak, GBP will likely remain pressured. However, if Brexit sentiment turns positive and GDP beats expectations, a GBP long could be a great trade.
Employment report consists of two releases, the Unemployment Rate and Employment Change. This is because Employment Change tends to deviate quite significantly from expectations. Furthermore, we can evaluate Employment Change in greater detail due to the Full-Time component. This means the report can be misleading if Full-Time contrasts with the headline.
For this reason, any deviation in Employment Change should be a result of Full-Time Employment.
US PRICE INDEX -USD
US CPI FOR JULY: If CPI Y/Y does rise to 3.0%, it will be at its highest level since December 2011. Regarding Core CPI Y/Y and Core CPI M/M, the market expects another print of 2.3% and 0.2% respectively. However, the market does expect CPI M/M to increase to 0.2% from 0.1% prior.
As inflation remains the primary focus for the outlook of monetary policy, any deviation will likely prove market moving.
A positive deviation should see USD strengthen and a negative deviation sees USD weaken.
Therefore, although a deviation could influence USD sentiment, we expect the fundamental outlook to remain bullish regardless of the data.
The clearest of these is the increasing influence of Brexit on GBP as it overshadows economic data and monetary policy. It’s crucial to evaluate any Brexit sentiment on GBP before trading UK GDP on August 10.
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