From ANZ on the week ahead. First, 'Key themes'

  • Markets have become (even more) sceptical about the Fed's ability to maintain its tightening plans. Last week's dovish tweaks in Yellen's testimony - which mirrored some more cautious rhetoric from other Fed's members - seem to suggest that an increasing number of officials are becoming less confident in the inflation outlook. While there is some potential that this trend can extend (continuing to provide support to cyclical currencies), momentum is looking a touch stretched. This week we prefer to focus on local data and currency crosses.

And, more on the AUD:

  • The uptrend in the AUD/NZD cross is at risk of stalling.
  • The cross burst higher off the back of strong confidence data in Australia and a soft ANZ Inflation Gauge in New Zealand, and to some degree these releases trumped the ability for data to surprise this week.
  • In New Zealand, core CPI is unlikely to rise enough to shift the RBNZ away from its cautious stance.
  • Expectations are low and, more broadly, the New Zealand economy continues to show clear evidence of tighter capacity relative to Australia, which should ultimately provide a floor for the NZD.
  • Meanwhile in Australia, labour force data will likely be positive again, but the surprise index is suggesting that the recent strong run of data (strong retail, better sentiment, rising job ads) has been calibrated into market expectations.
  • We don't think another positive employment report will be enough to shift the RBA on the level of spare capacity, thus providing a cap on the AUD.
  • The AUD remains vulnerable to Chinese data, and while GDP growth is expect to slow, the overall picture is likely to remain one of reasonably strong growth.


  • The minutes may reveal a little more about the RBA's decision to adopt a cautious tone at the June meeting, but they are unlikely to bring fresh reasons to sell the AUD. We will keep an eye on comments from Debelle and Bullock to get a few more colours on the RBA's mindset.

Events referenced by ANZ for the week to come:

  • NZ CPI is due 18 July
  • RBA Minutes due July 18
  • Australian labour data due July 20
  • Chinese data due today - Q2 GDP, June industrial production and retail sales
  • RBA Debelle speech July 21, Bullock also July 21


Also, note a speech coming up on July 19 from Alex Heath, Head of Economics Analysis Department.