- AUD/USD reached its lowest level since January 2017 last week
- Retail sales data very important this week
- US-China trade war continues to weigh on markets
Westpac Research Analyst Sean Callow said that the AUD/USD exchange rate dropped last week to its lowest level since January 2017, hitting close to 0.7325.
He feels that the biggest reason for this was the excellent performance of the USD, although other factors also played a role, such as the drop in the Chinese yuan.
He pointed out that since June 12 – just before the FOMC meeting – nearly all of the most important currency pairs were down against the American dollar.
Callow stated: “Within Asia, it is very notable that the yuan is equal-weakest (with KRW), -3.4%, given China’s previous preference for appreciation.”
Regardless of the reasons behind the yuan’s drop, it has given the AUD/USD a boost. A relatively quiet Australian calendar kept that country’s currency focused on international events, including fairly weak commodity prices and global trade tensions.
In the coming week, Callow feels that the RBA is very likely to keep its cash rate unchanged at 1.5%, but market players will be interested in its statement on issues such as the pressure being placed on mortgage rates by the increase in banks’ funding costs.
As far as Australian data is concerned, he said to expect building approval statistics, May’s updated retail sales, and the trade balance. The retail sales results will be particularly important given the RBA’s concerns about consumer spending.
Internationally, Callow said that they will closely monitor US-China trade relations and the ripple effect of the EU summit, which failed to resolve disagreements among German chancellor Angela Merkel’s coalition members.
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