A.REVIEW 5-9 DECEMBER.
Despite a slight contraction in the economy shown by a negative GDP and a negative trade balance, Aussie showed some strength for most part of the week.
The strength was mainly fueled by RBA decision to keep interest unchanged.
why did they take that decision , what data does RBA look at when taking this decision?
Pillars of monetary policy
INFLATION: seating at 1.3 still within that 2-3% target
LABOUR Market: .cost of labour growing slowly (positively influencing labour datas)
.slow employment growth (the current level is 1, 5 % above full employment, here also positive datas)
.underemployment still high (there still excess labour that is not employed, positive data)
.unemployment rate slowing down mainly due to increase in part-time job
HOUSING Market: strong even though dwelling approvals and new home sales data where weak.
Other factors that influenced interest rate decision
Bond yield (AUD 10 year bond) increased
Australia benefit from commodities support that in turn helps increase Australia terms of trade.
Exchange rate is weak, and good for trade.
China being Australia’s first trade partner, datas from china also impact on its Economy.
last week’s datas were mixed with a negative Trade balance but a better than expected CPI.
CONCLUSION RBA DECIDED TO KEEP INTEREST RATE AT CURRENT LEVEL BECAUSE IT S CONSISTENCE WITH THE ACTUAL GROWTH OF THE ECONOMY.
AUDUSD: the pair traded higher last week again , taking advantage of Aussie ‘s strength and in the wait of US interest rate decision,currently trading at 21 ema resistance. Pair ranged last week
EURAUD: with the Italian referendum and ECB ‘s decision to maintain interest rate at 0.0% and a negative GDP euro was mostly weak last week. pair was bearish last weak
AUDCAD: besides OPEC members agreement to reduce output, last weak CAD strength was also fuelled positive trade balance, BOC decision to keep interest rate unchanged and a decrease in crude oil inventory.
B.THE WEEK AHEAD 12-16 DECEMBER .
Important economic data for AUD .
China: Industrial production and Retail sales
Australia: employment change and full employment change (note: employment is one of the pillars of monetary policy).
As for the rest of economic news there is interest rate decisions on Wednesday from US and on Thursday from UK. I recommend to look closely at the economic calendar this week as there is a lot of important news that may cause volatility in the market.
I will remain bearish on AUD not because of its weakness but because I believe the other currencies are stronger, I will trade the pairs below and wait for opportunities to sell AUD.