Forex Investment and Currency Trading

This is an important week for Australian markets, coming in the wake of the Reserve Bank of Australia’s (RBA’s) comments last week, which appeared to signal a change to a neutral from an easing policy stance. Today, we have monthly home loans, investment lending, and value-of-loans data for June. Home loan growth bounced sharply from a low of -3.1% in September 2008 to 6.5% in December 2008, but since then has moderated to 1.8% in April and 2.2% in May. Business and consumer confidence indicators are released on Tuesday and Wednesday, followed by the Q2 wage cost index on Wednesday morning. The market is expecting this to come in at 0.8% q/q and 3.8% y/y versus 0.8% q/q and 4.2% y/y previously. On Thursday, we get the August consumer inflation expectations number. Finally, on Friday, RBA Governor Stevens gives his semi-annual testimony to parliament. Following the RBA’s move to neutral and the quarterly Monetary Policy Statement (MPS), which said that “movement (in the cash target rate) towards a more normal setting of monetary policy could be expected at some point if further signs of a durable recovery emerge,” the Australian money market is now pricing in a total of 163bps in policy rate hikes over the next 12 months. Medium-term, remain constructive on this currency given global economic prospects.