Australian dollar traders might like to take note of the risks ahead on the next few days.
From the Australian central bank:
- 0330GMT Tuesday 5 March 2019 - policy meeting announcement and Lowe's Statement
- 2210GMT Tuesday 5 March 2019 - Reserve Bank of Australia Governor Lowe speaks, topic is 'The Housing Market and the Economy'
Its not just the RBA, there is data as well:
- 0030GMT Tuesday 5 March 2019 - current account Q4 9watch for 'net exports' as an input to Q4 GDP. Also government finances.
- 0030GMT Wednesday 6 March 2019 Q4 GDP
Focusing on the central bank events, this preview (in brief) via NAB:
- RBA meets on Tuesday … markets will scrutinise the post-meeting statement for signs that the building blocks for GDP have caused the RBA to shift its growth outlook
(note - RBA Q4 GDP forecast 0.6% q/q, 2.8% y/y)
Back to NAB:
- We think Lowe's speech will cover the key channels by which the current housing downturn can affect the macroeconomy, such as 1) reduced residential investment; 2) the wealth effect of lower prices on household spending; 3) reduced construction-related employment; 4) lower rents affecting underlying inflation; and 5) lower prices pressuring small business investment.
- We think the Governor will argue that the wealth effect is limited and will argue that the economy has absorbed the decline in prices to date well. It will be interesting to see, though, whether he concedes that investment is falling at a faster rate than assumed by Bank staff and we think this issue will come up in the Q&A session even if he does not directly address it in his speech.
- If the Governor does end up suggesting that the Bank is reconsidering its outlook, particularly for residential investment and employment, we think that this could see markets price in a higher chance of a rate cut this year.
