AUD news - page 18

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Australia - Westpac Consumer Confidence Index (January): +0.1% m/m


Westpac / Melbourne institute Consumer Confidence Index (for January)

Up 0.1% on the month to 97.4
  • The December results was -3.9% to 97.3
 

Australia jobs report (December) - Employment Change: +13.5K (expected +10K)


From the Australian Bureau of Statistics, the Labour Force December 2016 report

Employment Change: +13.5 K 
  • expected +10.0K, prior +37.1K, revised from +39.1K

Unemployment Rate:  5.8%

  • expected 5.7%, prior 5.7%

Full Time Employment Change: +9.3 K

  • prior was +38.3K, revised from +39.3K

Part Time Employment Change: +4.2 K

  • prior was -1.3K, revised from -0.2K

Participation Rate: 64.7 %

  • expected is 64.6%, prior was 64.6%
Those results are the seasonally adjusted, which are the focus.

Here are the 'trend' numbers:
  • Total trend employment increased by 8,200 (represents an increase of 0.1 per cent, remaining below the monthly average growth rate over the past 20 years of 0.15 per cent.)
  • Monthly trend full-time employment increased by 7,000 (The third consecutive month of increasing full-time employment)
  • Part-time +1,100
  • Trend unemployment rate was 5.7 per cent (for the ninth consecutive month)
  • Trend participation rate was unchanged at 64.6 per cent
  • The trend monthly hours worked increased by 2.3 million hours (0.1 per cent), with increases in total hours worked by both full-time workers and part-time workers
  • Over the past 12 months, trend employment increased by 85,600 (or 0.7 per cent), which is less than half the size of the average year-on-year growth over the past 20 years (1.8 per cent)
  • Over the same 12 month period the trend employment to population ratio, which is a measure of how employed the population over 15 years is, decreased by 0.4 percentage points to 60.9 per cent
(Says the ABS: Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market)
 

Australia Consumer Inflation Expectations Surge to 4.3% in January


A closely watched measure of Australia’s inflation expectations surged in January to the highest level in almost three years, a sign of diminishing slack in the economy.

The Melbourne Institute’s 12-month gauge of inflation expectations improved to 4.3% in January, following a reading of 3.4% in the final month of 2016. That was the highest level since May 2014, when 12-month inflation expectations were 4.4%.

In weighted terms, more than two-thirds (67.3%) of respondents said they expect inflation to fall within the 0-5% range over the next 12 months.

Last year, the Reserve Bank of Australia (RBA) lowered interest rates to new record lows in an effort to engineer faster inflation. Annual consumer price growth weakened to just 1% in the second quarter, a 17-year low, prompting another rate cut by the Reserve bank in August.

Australia’s last official reading of consumer price inflation came in at 0.7% in the third quarter, which translated into a year-over-year gain of 1.3%.

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Australia data - HIA New Home Sales (Nov.): +6.1% m/m (prior -8.5%)

 

AUD/USD Little Changed Following Presidential Inauguration


The Presidential Inauguration held in Washington provided little volatility in the currency markets with most major pairs trading relatively unchanged following the event. President Trump gave a brief speech after being officially sworn in as the 45th president of the United States but did not discuss the US economy.

Commodity currencies were under pressure on Friday but AUD/USD held above important levels, remaining in a clear bullish trend. Among the commodity currencies, the Australian Dollar has posted the smallest decline on the day. The Kiwi Dollar posted the largest losses among its major counterparts to lead the decliner’s list for the day. The Australian Dollar shows the second largest gains in the week thus far, falling only behind the British Pound and remains the strongest currency for the month.

AUD/USD turned lower after posting a marginal new high for the week in Asian trading. The decline has been steady while a weaker Dollar in the North American session triggered a recovery. AUD/USD trades above important support the decline today turned ahead of a horizontal level as well as a rising channel. The horizontal level falls at 0.7506 and marks the October low. The rising channel connects the high from January 12 with the high of January 17 and can be seen on a 4-hour chart.

 

AUD/USD: Trading Close To Fair Value; Positioning Close To Flat


When AUD/USD was sub-0.72 and falling in the last week of December, there would have been very few (any?) takers for a bet the pair would be back above 0.75 before the second week of January was out. One of the oldest adages in the FX market playback is that ‘it always looks most offered at the bottom’. Still very wise words.

The biggest issue we have been grappling with in recent weeks with respect to the AUD has been the estimated deviation from our short term fair value model (STFV) estimate that calculates fair favour in relation to oneyear rates differentials, key commodity export prices and risk appetite. This has run consistently between about 0.7550 and 0.77 since Trump’s election victory and for much of the time more than 1 standard deviation (~2.5 cents) above spot. Our sense has been that markets have been applying a discount to the AUD based on its enduring high correlation with Asian EM currencies and where CNY comprises over 40% of the ADXY basket.

AUD remains the preferred, liquid proxy-hedge against Asia EM weakness. Fears that the start of 2017 would see intensification of pressure on CNY from capital outflows once the clock re-set on the $50,000 annual limit on households FX purchases, together with concerns over heighted protectionism directed at China from the new Trump administration, look to have undermined AUD relative to our STFV estimate.

Fast forward to early 2017, and the combination of a dramatic squeeze on short offshore (CNH) positioning combined with seemingly successful efforts by China to throw sand in the gears of Chinese capital outflows, has seen AUD come roaring back. To be sure, broad-based USD selling has been part of the story. But we’d note that the AUD TWI has rallied by 2.5% this far in 2015, much more than implied by the rise in AUD/USD of about 5%. The USD weight in the AUD TWI is only 11.5% and AUD has been by far the best performing currency YTD.

As such, the discount being applied to the AUD for China/EM risk has been dissipating. This looks like allowing AUD/USD to trade close to fair value near term, though we’re not expecting the pair to push much above 0.7500 for a sustained period in the absence of a much deeper purge of long USD positioning (but which in the case of AUD/USD is now close to flat.

source

 

AUD/USD forecast for the week of January 23, 2017


The AUD/USD pair broke above the 0.75 level during the week, and it looks like it is a bit bullish. However, I would state that the US dollar is going to strengthen longer-term, so we can break down below the bottom of the candle I feel the market should then reach down to the 0.72 level. A breakdown below there should send the market to the 0.70 level underneath there, and thus it’s only a matter of time before we get the opportunity to short. However, the 0.7750 level above is what I believe is the “ceiling” in this market.


 

Australia data - ANZ Weekly consumer confidence: 117.0 (prior 119.3)


ANZ-Roy Morgan consumer confidence index

Sliding further this week (week ended January 22)
 

Australia Q4 CPI: +0.5% q/q (expected +0.7% q/q)




Q4 2016 inflation data from Australia

Q4 CPI  - The 'headline':  0.5% q/q ... comes in well under the expected
  • expected +0.7%,
  • prior was +0.7% 

For the y/y, 1.5 % ... under the expected

  • expected 1.6%, prior 1.3%

-

The 'trimmed mean': 0.4% q/q  ... under the expected

  • expected 0.5%

  • prior 0.4% q/q

For the  y/y: 1.6% ... in line with the consensus median expectations

  • expected 1.6%, prior 1.7%

-

'Weighted median': 0.4% q/q ... under expected

  • expected 0.5%, prior was 0.3%

For y/y:  1.5% ... higher than expected
  • expected is 1.4%, prior was 1.3%
 

AUD: Aussie Is No Longer Cheap; Neutral Signal Around Current Levels


The Australian dollar has been one of the best performing currencies at the start of this year lifting the AUD/USD rate from around the 0.7200-level at the end of last year back towards the 0.7500-level around where it spent most of last year trading. Aussie weakness at the end of last year was undershooting key short-term fundamental drivers and it has since displayed catch up strength.

Our short-term valuation model is now sending a more neutral signal for the Aussie. The Aussie has benefitted at the start of this year from the pull-back in US yields, ongoing improvement in global risk sentiment, and the strengthening global growth outlook which is supporting higher commodity prices. The strengthening global growth outlook is a positive for Australia’s economy, although the accompanying strengthening of the Aussie is less desirable for the RBA who are currently confronting uncomfortably low inflation.

The release overnight the latest Australian CPI report confirmed that both headline and core inflation remained soft in Q4. The average of RBA’s two core inflation measures has remained at around 1.6% throughout last year. It is broadly in line with the RBA’s forecasts so is unlikely to prompt a change in their policy outlook. The combination of currency strength and continued low inflation will keep the possibility of a further RBA rate cut on the table, although the RBA currently remains comfortable to leave its policy stance unchanged limiting downside risk for the Aussie in the near-term. More likely the RBA will have to tolerate the strength of the Aussie for now.

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