This week is jam packed with Aussie data - Westpac

Analysts at Westpac explained that Australia’s calendar this week is jam-packed. 

Key Quotes:

"Normally the RBA would be the key event but this week it’s probably GDP that will be most market-sensitive. In a flurry of comments in February, the RBA made clear that it does not “see a strong case for a near-term adjustment of monetary policy.”

So there is no tension over the 1.5% cash rate at Tuesday’s RBA Board meeting and presumably limited change in the wording of the statement compared to February, with no data on CPI or GDP between meetings. Potentially more interesting could be the speech by Governor Lowe on Wednesday.

Australia Jan readings on retail sales, trade balance and building approvals will be worth noting but despite how long we have to wait for the data, GDP is most important, as the broadest reading of the economy’s health. Westpac looks for growth of around 2.5% y/y, though Tuesday’s data on net exports could see forecasts tweaked. Such a pace of growth is what we expect for 2018 and 2019 as well – in contrast to the RBA’s forecasts of >3% growth.

If Australia’s GDP growth is close to market forecasts, then AUD/USD should be driven by global factors. Australia’s key commodity prices have been roughly flat over the past month, down from January’s highs but retaining the bulk of the Nov-Jan rally.

Talk of a global trade war will rumble for some time, with the US administration promising to impose steep tariffs on steel and aluminium as soon as this week. AUD would suffer if a large scale trade war caused global trade volumes to drop but at this point, that is only a worst case scenario.

The US dollar mood may prove key for AUD/USD over the week. Fed chairman Powell boosted the dollar last week with an optimistic outlook for the economy. This contributed to AUD/USD dipping as low as 0.7713, its weakest point since late December. The February US employment report should be strong again though there will be some nerves around whether the jump in average earnings reported in January is sustained.

If the bullish US economic narrative is maintained as we expect then AUD/USD should chop down to a lower trading range of say 0.7650-0.7800. AUD crosses could be quite lively this week, with close market interest in policy decisions by the European Central Bank, Bank of Canada and Bank of Japan."