Aussie Dollar Sinks as Soft Data Boosts RBA Rate Cut Bets

DailyFX

The Australian Dollar sank after June’s Building Approvals report fell short of expectations, boosting bets on an RBA interest rate cut at Augusts’ meeting.

Talking Points

  • Australian Dollar Sinks as Building Permits Miss Drives RBA Rate Cut Bets
  • Euro May Weaken as German CPI Slowdown Boosts Dovish ECB Speculation
  • US Dollar to Resume if July’s Consumer Confidence Report Underperforms

The Australian Dollar underperformed in overnight trade, sliding as much as 1.4 percent on average against its top counterparts, after a disappointing set of Building Approvals data boosted RBA interest rate cut expectations. Permits fell 6.9 percent in June, marking the largest monthly drop since July 2012. Traders are now pricing in a 90 percent probability of a 25bps reduction at the next policy meeting, the highest in two months. The Japanese Yen weakened as Asian stocks advanced, boosting demand for carry trades funded in terms of the perennially low-yielding currency.

July’s German Consumer Price Index data headlines the economic calendar in European hours. Expectations call for the headline year-on-year inflation rate to decline to 1.7 percent, moderating from a six-month high at 1.8 percent recorded n the prior month. The Euro continues to track monetary policy expectations, hinting a soft print may weigh on the single currency as traders price in a greater probability of a dovish ECB when the central bank delivers its monthly policy announcement later in the week.

The spotlight then shifts to the US economic calendar, where July’s Consumer Confidencefigure will helpinform speculation surrounding the Fed’s intentions to “taper” the size of its QE asset purchases. On the whole, US economic outcomes appear to be losing momentum relative to expectations over recent weeks. This keeps the door open for a disappointing print that undercuts the case for a near-term reduction in stimulus and applies renewed downward pressure on the US Dollar.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Building Permits (MoM) (JUN)

-4.0%

-

1.0%

23:30

JPY

Household Spending (YoY) (JUN)

-0.4%

1.4%

-1.6%

23:30

JPY

Job-to-Applicant Ratio (JUN)

0.92

0.91

0.90

23:30

JPY

Jobless Rate (JUN)

3.90%

4.00%

4.10%

23:50

JPY

Industrial Production (YoY) (JUN P)

-4.8%

-2.6%

-1.1%

23:50

JPY

Industrial Production (MoM) (JUN P)

-3.3%

-1.5%

1.9%

1:30

AUD

Building Approvals (MoM) (JUN)

-6.9%

2.0%

-4.3%

1:30

AUD

Building Approvals (YoY) (JUN)

-13.0%

0.0%

-2.2%

3:05

AUD

RBA Governor Stevens Speaks in Sydney

-

-

-

4:00

JPY

Vehicle Production (YoY) (JUN)

-9.5%

-

-6.2%

5:00

JPY

Small Business Confidence (JUL)

49.4

-

49.6

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

EUR

German GfK Consumer Confidence (AUG)

7.0 (A)

6.8

Low

7:00

EUR

Spanish GDP (QoQ) (2Q P)

-0.1%

-0.5%

Medium

7:00

EUR

Spanish GDP (YoY) (2Q P)

-1.8%

-2.0%

Medium

8:30

GBP

Lloyds Business Barometer (JUL)

-

36

Low

9:00

EUR

Euro-Zone Economic Confidence (JUL)

92.5

91.3

Low

9:00

EUR

Euro-Zone Industrial Confidence (JUL)

-10.2

-11.2

Low

9:00

EUR

Euro-Zone Consumer Confidence (JUL F)

-17.4

-17.4

Medium

9:00

EUR

Euro-Zone Business Climate Indicator (JUL)

-0.54

-0.68

Low

9:00

EUR

Euro-Zone Services Confidence (JUL)

-8.9

-9.5

Low

12:00

EUR

German CPI (MoM) (JUL P)

0.3%

0.1%

High

12:00

EUR

German CPI (YoY) (JUL P)

1.7%

1.8%

High

12:00

EUR

German CPI - EU Harmonised (MoM) (JUL P)

0.3%

0.1%

Low

12:00

EUR

German CPI - EU Harmonised (YoY) (JUL P)

1.8%

1.9%

Low

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.3209

1.3321

GBPUSD

1.5276

1.5392

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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