AUD/USD Weekly Forecast – 07 November

Friday, Nov 04 2016

Events that marked the week:

Tuesday's session brought China's Manufacturing PMI data. The Caixin China General Manufacturing PMI for October climbed to 51.2, up 1.1 compared to the previous month, marking the fastest growth seen in the sector in two years amid apparent signs of an improvement. The index readings for new orders and output for October were both much higher than in September, and those for input and output prices rose even more, indicating a return of inflationary pressure. The economy seems to be stabilizing for the moment, owing primarily to policies implemented to sustain growth. Supportive policies must be continued, or industrial output may be dragged down by a slowdown in investment.

However, the focus of the session was on RBA interest rate decision. The Reserve Bank of Australia kept the cash rate at a record low 1.5% as expected on Tuesday with its policy stance unchanged. Taking account of the available information, and having eased monetary policy at its May and August meetings, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

On Wednesday, Building Approvals figures were released. In trend terms, approvals for private sector houses fell 0.5 per cent in September. Private sector house approvals fell in South Australia (1.2 per cent), New South Wales (0.9 per cent), Victoria (0.6 per cent), Queensland (0.5 per cent) and Western Australia (0.3 per cent). In seasonally adjusted terms, dwelling approvals decreased 8.7 per cent in September, driven by a fall in total other residential dwellings (17.5 per cent). Total house approvals rose 1.7 per cent.

On Thursday, Trade Balance data was released. In trend terms, the balance on goods and services was a deficit of $1,784m in September 2016, a decrease of $127m (7%) on the deficit in August 2016. In seasonally adjusted terms, the balance on goods and services was a deficit of $1,227m in September 2016, a decrease of $667m (35%) on the deficit in August 2016. In seasonally adjusted terms, goods and services credits rose $426m (2%) to $27,254m. Non-rural goods rose $578m (4%) and rural goods rose $174m (5%).

Friday was marked by Australian Retail Sales data. Australian retail turnover rose 0.6 per cent in September 2016, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures. This follows a rise of 0.5 per cent in August 2016. In seasonally adjusted terms, there were rises in household goods retailing (2.3 per cent), cafes, restaurants and takeaway food services (1.0 per cent), food retailing (0.2 per cent) and department stores (0.5 per cent).

This week markets will be looking at:

China's Trade Balance (Tuesday)

China's CPI/PPI (Wednesday 2:30)

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