FX WEEK AHEAD OVERVIEW:
- The US-China trade war continues to rage, and its effects will be apparent in the week ahead as some of both countries’ largest trading partners’ central banks will be leaning into interest rate cuts.
- Growth data from two other large economies, Japan and the UK, are both expected to show signs of a more apparent slowdown.
- Retail trader positioning is bearish on the commodity currencies, but isn’t that much more optimistic about the US Dollar[2] after its early-August troubles.[1]
Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.[3][4]
08/06 TUESDAY | 04:30 GMT | AUD RESERVE BANK OF AUSTRALIA RATE DECISION
Since the last Reserve Bank of Australia rate decision on July 2, the Australian economy has not made any meaningful progress, nor really has it done much negative: economic data trends have been flat. The Citi Economic Surprise Index for Australia, a gauge of economic data momentum, gained from 1.8 on July 2 to 2.2 by Friday, August 2.
Reserve Bank of Australia Interest Rate Expectations (August 2, 2019) (Table 1)
Nevertheless, it remains unlikely that the August RBA meeting produces any change in policy, with overnight index swaps pricing in only a 9% chance of a 25-bps rate cut. But to be clear, these odds were 0% midweek; expectations are quickly rising that the RBA could act as early as October, where overnight index swaps are now pricing in a 61% chance of a rate cut.
Read the full report: August RBA Meeting & AUD/USD Rate Forecast[5]
