AUD: The week ahead - ANZ

Research Team at ANZ, notes that the AUD continues to outperform despite periods of market stress and geo-political uncertainty.

Key Quotes

“Domestic news is unlikely to be a catalyst for disappointment in the near term. The domestic calendar is quiet ahead of the key CPI print (27 July) with the exception of the RBA minutes next Tuesday. Rates markets continue to attribute a 50/50 chance of a rate cut for August, premised on expectations of a weak CPI.

Stability in China’s economy has broadly supported the AUD this year and market sentiment more generally. The market expects GDP (released Friday) to gradually slow. ANZ is looking for a below market result and our economists believe a 6.5% target for 2016 will be a strenuous task.

Outside of this, the BoE meets tonight and the question is does the BoE act pre-emptively and cut rates now or wait for data? A rate cut is largely priced into markets, moreover as the chart of the week shows; a rate hike is not priced until late 2021.

June CPI data is released for the US and New Zealand in coming days. Recent months have seen a rise in US inflation, albeit within the range of expectations. Still any strength in the US CPI would likely raise concerns the Fed is getting behind the curve and drive the USD higher. The NZ CPI takes on more importance given the recent bifurcation of market views for an August rate cut.”