Australian Dollar Wilts After Mixed Data Dump, RBA In Focus

AUSTRALIAN DOLLAR TALKING POINTS:

• AUD/USD slid as a new week got under way
• Local data were mixed but the more timely numbers were the weaker
• China’s manufacturing secotr held up, just.

The Australian Dollar tracked lower on Monday following a raft of domestic and Chinese economic data- China’s economy being of crucial importance to Australia thanks to the two countries’ vat investment and export links.

Australia’s July retail sales were flat on the month, according to official figures, when the market had been looking for 0.3% gain. To make matters worse job-advertisement levels fell by 0.6% in August, a survey by the Australia and New Zealand banking group found. This was well short of the 1.5% gain previously seen and perhaps puts some doubt over job-creation ahead. The local labor market has been a pretty unambiguous economic bright spot in recent years- Aussie bulls won’t welcome any sign that it is dimming.

Corporate inventories rose nicely though, so the data weren’t all bleak. However, their 0.6% gain was for the second quarter and so the number may be a little historic for investors’ taste. Corporate profits rose by 2%, again beating expectations but, with the benchmark ASX 200 index close to ten-year highs, a lot of good news must already be in the price.

Bringing up the rear was the august Chinese Purchasing Managers Index for the manufacturing sector from media name Caixin. It came in at 50.6. That kept it in ‘expansion’ territory- any reading above 50 does that- but it was the lowest print for 14 month and a whisker below the 50.7 expected.

All up these numbers will do nothing to alleviate widespread investor suspicions that the best of 2018’s regional growth has already been seen, and that they will have to make do with a much scrappier prospect as the year bows out. AUD/USD duly slipped in the aftermath, if not by much.

On its daily chart the pair remains locked into its long downtrend channel. This has endured for much of 2018 as the interest-rate differential gap has turned inexorably to the US Dollar’s advantage. With no letup in sight for this process, at least for the rest of this year and, possibly, much of next, AUD/USD is almost bound to remain on the defensive.

This week will bring an interest rate decision from the Reserve Bank of Australia, with the Official Cash Rate expected to remain on hold at its now elderly 1.50% record low for yet another month

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