Talk of the town this Friday is the Australian dollar (AUD), it saw a slight increase of 0.38%, settling at $0.65220 against the good old U.S. Dollar. Quite surprising, considering the typically bullish US greenback has had a slight wobble, thanks to some less than impressive manufacturing and consumer sentiment figures across the pond.
What’s more interesting is that the AUD has managed this climb amidst the rollercoaster ride of global financial markets. No doubt, the Aussie economy’s strong rebound from the Covid-19 pandemic played a role here. But with the uncertainty around U.S. fiscal stimulus measures and the geopolitical drama, no one could say for sure if this trend is here to stay.
Our AUD had an adventurous day, dropping to a low of $0.64895 before reaching a peak of $0.65339. The market’s anticipation ahead of the Q4 gross profit announcements by Australian corporations on Monday is a likely reason. Economists are predicting a rise of 1.8%, a happy change from the 1.3% fall in Q3.
Now, an increase in earnings usually hints at higher consumer spending, a precursor to further profit growth. This could potentially trigger job creation and wage growth, leading to more disposable income for us folks. But let’s not count our chickens before they hatch – we also need to consider the potential impact of high inflation and interest rates, particularly on housing costs.
Speaking of housing, investors are likely to pay close attention to Australia’s building permit data scheduled for release on Monday. Predictions hint at a 4% rise in January, a relief from the 9.5% dip in December 2023. This could create a surplus in the housing market and possibly bring down rental prices.
Also hitting the monitors on Tuesday is Australia’s retail sales data for January 2024. Analysts are tipping their hats to a modest growth of 1.5%, hinting at a possible improvement in consumer spending. On Wednesday, the Wage Price Index might reveal positive signs of the economy bouncing back. Let’s hope it brings some much-needed cheer to the retail sector.
The following day, it’s the job market’s turn under the spotlight, with the Australian Bureau of Statistics releasing the unemployment figures for January 2024. Predictions hint towards a stable labor market with an unemployment rate of about 5%. This may boost our morale, which in turn could stimulate economic activity.
Closing out the week, we’ll hear from the Reserve Bank of Australia on their monetary policy statement and cash rate decision. With global uncertainties aplenty, they are expected to keep the cash rate steady at 0.1%.
As these updates trickle in, investors everywhere will be watching the tea leaves, data, and trends to make calculated investment decisions. Watching fluctuating building permits alone won’t cut it. It’s also crucial to keep an eye on significant global events, especially developments in China, like the National People’s Congress inauguration on Tuesday.
Over in the US, news and insights from the Federal Open Market Committee, especially Patrick Harker, will be closely followed. With the dropping Core PCE Price Index data and fragile consumer sentiment, speculation is rife about a Federal Reserve rate increase in June. Other influences on the AUD/USD trend would undoubtedly be the US trade balance, Nonfarm Payroll data, and key announcements from the Biden administration.
In conclusion, although a potential Federal Reserve Rate increase in June seems likely, other economic indicators will play decisive roles as well. For now, it looks like the ride for the AUD/USD might just get a little bit bumpy!
