The pressure could rise on the Australian dollar

The challenges for the Aussie are also increasingly being grown at home.

"In our opinion, the downside risk to Australian interest rates and the AUD has increased significantly," Greg Gibbs of Global FX Capital said in a Friday comment.

"The continued increase in the borrowing costs of banks that led Westpac to raise mortgage interest rates is a further tightening of monetary conditions and comes at a precarious moment for the housing market," he said.

In addition, Mr Gibbs said that Australian political risk is increasing as an election approaches after about six months and recent economic data suggest some moderation in activity.

The coming week will, starting with Monday, yield a large amount of data to help investors reconsider the prospects for the local economy, interest rates and currencies.

On Monday there is the retail sale for July, the August index for production in August, the MI inflation for August and the ANZ vacancies for August. On Tuesday, the RBA holds a policy meeting and Governor Philip Lowe is ready to speak at a dinner meeting on the board in Perth.

On Wednesday there is the long-awaited GDP report of the second quarter and AiG & # 39; s index for July trading data on the AiG performance of July and Friday for July and home financing for July.

Although no price change is expected this week, Mr. Lowe has a chance of a press conference after the meeting and later in his speech to give directions on the policy outlook.

"The bank has done a lot of work to be able to communicate clearly that the next rate hike is more likely than lower, and the progress in reducing unemployment and returning inflation to the target is expected to be gradual and therefore happy to stay on hold. & # 39; a while & # 39 ;, & # 39; said NAB economist Kaixin Owyong.

"We do not expect any change in the core message," says Owyong. "However, we will be looking for indications that recent developments may have affected the outlook, especially markets will want to pay attention to any comments related to the recent rise in home rates at Westpac.

"The opinion of the RBA was that the current credit default is mainly driven by demand and the credit tightening has downplayed – does this change their position in any way?"

Also checking the Australian dollar is the difference in yield between the US and Australian 10-year government securities that reached 34 basis points during the weekend, another sign that investors see lower risk for their money in the US than here.

The expectation that the gap will increase to 60 basis points in the first half of 2019 was one reason why RBC Capital pushed the potential for a local rate hike to the second half of 2019 at the end of last month.

Westpac's interest rate hike will further restrict the RBA's ability to hike, according to RBC's chief Australian economist Su-Lin Ong and macro strategist Robert Thomson.

"Tighter financing conditions are one of the three most important factors that we have been highlighting for a long time and which the RBA is likely to stop longer," said Ong and Mr. Thomson in a Friday paper. "The other two factors are downside risks for global growth and abundant spare capacity on the Australian labor market."

A week earlier, the two RBC experts said that the longer the RBA is 1.5 percent, "the less certain we are about the direction of the next step, especially if the global activity becomes more modest" in the second half of 2019 and 2020 .

Indeed, Mr Trump's decision to put his rhetoric about trade into reality can indeed slow down global growth, as the International Monetary Fund predicted.

And so it seems that Australian dollar bears will smile longer.

Source link

Leave a Reply