Early Tuesday morning, at 01:30 GMT, the Reserve Bank of Australia (RBA) will release minutes of the latest monetary policy meeting held during the early-September. Following that, the National Bureau of Statistics of China will release August month’s Retail Sales and Industrial Production data at 02:00 GMT.
With the RBA’s monetary policy decision to keep the exchange rate unchanged at the record low of 0.25% battling the extension of Term Funding Facility, traders will be keen to watch the Minutes statement for near-term direction. The central bank policy statement also struck mixed messages, while expecting economic recovery and searching for options to ease the monetary policy if needed, at the same time.
On the other hand, data from China, Australia’s biggest consumer, has been mostly positive off-late. However, any downside surprises may not await further clarification during the key week. Forecasts suggest, Retail Sales growth to clock in at 0.0% year-on-year against -1.1% reported prior whereas Industrial Production might retrace from 4.8% previous readouts to 5.1% (YoY). Adding to the line is August month Fixed Asset Investment data on the year to date YoY basis. The investment gauge is likely recovering from -1.6% to -0.4% during the reported period.
Concerning the events, TD Securities say,
The biggest surprise for the market in the RBA's statement 2 weeks ago was the decision to upsize and extend the Term Funding Facility. We expect the market to comb through the Minutes to look for any clues on the Bank's thinking - has the Bank become more concerned on the outlook just a month after it published its Aug SOMP or was the decision executed on grounds of operational efficiency? The Board's suggestion it will explore other options to ease monetary conditions was clearly dovish. Does it mean more could be on offer when the Federal Budget is delivered on 6th Oct? The Minutes may provide clues.
We expect August industrial production to increase by 5.0% y/y from 4.8% previously. Resilience in China's manufacturing PMI, which has been in expansion for five straight months as well as other high-frequency data such as refinery operating rates, point to further improvement in industrial activity. Retail sales are expected to show improvement and move back to flat y/y in Aug after five months of negative readings, but consumer spending will likely continue to lag the improvement in industrial activity.
How could the minutes affect AUD/USD?
While major communication from the Reserve Bank of Australia (RBA) has been dovish off-late, any positive surprises will help the AUD/USD pair to keep the recovery moves guided towards piercing 0.7300 immediate resistance. Though, any more dovish comments and/or downbeat data from China will be enough for the AUD/USD traders to snap the two-day winning streak.
Technically, a clear break of 0.7300 will enable the bulls to aim for 0.7340/45 ahead of challenging 0.7400 round-figures and August month’s peak surrounding 0.7415. Meanwhile, 21-day SMA near 0.7260 offers immediate support to the quote before the monthly bottom close to 0.7190.
About the RBA minutes
The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.
About China's Industrial Production
Industrial output is released by the National Bureau of Statistics of China. It shows the volume of production of Chinese Industries such as factories and manufacturing facilities. A surge in output is regarded as inflationary which would prompt the People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, if high industrial production growth comes out, this may generate a positive sentiment (or bullish) for the CNY (and AUD), whereas a low reading is seen as negative (or Bearish) for the CNY (and AUD).
About China's Retail Sales
The Retail Sales report released by the National Bureau of Statistics of China measures the total receipts of the retailed consumer goods. It reflects the total consumer goods that the various industries supply to the households and social groups through various channels. It is an important indicator to study the changes in the Chinese retail market and reflecting the degree of economic prosperity. In general, A high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.
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