The Australian Dollar is consolidating around the 72cents mark, trading 0.7160-0.7243 past 24 hours with latest capex data disappointing and USD profit taking overnight. It has been a remarkable month for the AUD, lower by 5% or 4 cents as the change in sentiment was swift after the RBA decided to cut rates based on inflation outlook. The market pricing of US Fed increasing rate also jumped from single digit to 33% chance after FOMC minutes and Fed members’ hawkish commentaries. US Fed Chair Yellen’s view is the most important and she is due to speak on early Saturday morning. Yellen is on the dovish side of monetary policy so any contrasting views with recent hawkish Fed members could significantly swift expectation.
Next week, we have Australia’s 2016Q1 GDP, last data on 2015Q4 beats expectation, recording 3% GDP year to year. Given the low Q1 CPI numbers, it will be interesting to see whether the GDP numbers also follow the same trend. (Note: CPI data is released 25days after Q1 ends, while GDP is 65 days after).
Gold is losing its shine, lower by $73USD or 5.4% in May after posting monthly high at 1304USD beginning of the month. The yellow metal found solid demand in 2016 as central banks eased their monetary policy; BOJ introduced negative rate, ECB went further into negative rate, US Fed changed outlook from 4 to 2 rate hike and China’s stimulus. With market stabilising in May and swift in US Fed rate hike expectation, risk seeking behaviour drives flow out of safe haven gold to higher yielding equities and US bonds. Yellen’s view of June/July rate hike will be key for the next direction for gold.
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