Coming up this evening we have some important data about the Australian economy. The data is related to the housing situation and insight into business confidence.
While the RBA doesn’t follow those bits of data, we do have a speech by the RBA deputy governor also on the schedule. So, we could be in for some volatility in AUD pairs. Let’s have a look at what we might expect.
Agenda and Expectations
The data starts at 01:30 CET on Tuesday (or 20:30 EST on Monday) with two simultaneous releases. This is where we are likely to see most data-related volatility in the AUD pairs. In fact, this is the only major data release expected for Australia for the whole week. Therefore, we could see the markets set their fundamental trend here.
As anyone who’s trading the AUD knows, housing is a major economic issue in Australia right now. So, we’re looking for something of a turn around here if possible. The consensus of expectations is for a better result (relatively speaking.) Home loans are expected to have increased by 1.0% during February, which would be a substantial improvement over the -0.61% registered the prior month.
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NAB Business Confidence
The NAB Business Confidence data also comes out at the same time. It’s an important indicator for whether businesses are in the mood for hiring, investing and generally pushing the economy forward. All last year it’s been largely trickling lower, but remaining positive. November and December tied for the worst performance since June 2016, and the consensus among analysts is that it will return to that level in February as well. Expectations are for a reading of 3 compared to 4 last month.
The calendar finishes up at 08:00 CET or (03:00 EST) with a speech by Guy Debelle, assistant governor of the RBA. Debelle will be talking before the Centre for Policy Development. The meeting, despite the name, is not supposed to be policy-related, so we aren’t expecting comments on RBA future monetary policy.
The Data Implications
The home loans indicator tracks the number of home loans approved. This is different from the total value of home loans. Despite the number of home loans going up and down, the total value of housing debt has been increasing. This is also in spite of the media coverage of housing difficulties for the last several months.
In the last twelve months, this indicator has been positive only twice. And January’s data was the worst performance since mid-2015. However, this is month-over-month data and tends to fluctuate a bit. A cumulative of a few months of below-average performance (the average for the last couple of years being negative already) would be a worrying sign.
The market generally doesn’t consider momentary fluctuations in the value of the currency. However, as far as longer-term effects, perhaps the Investment Housing Loans is a better indicator of the long-term health of the housing sector, and the financial services based on mortgage lending.
After all, the last time around, it was investment housing that caused the major problem associated with mortgage-backed securities. Building for investment is usually the first to be cut under economic pressure.
As for the NAB business confidence, anything above 0 shows still a positive outlook for the economy. However, it generally averages around 6. In order to move the market, we’d have to see a significant deviation from that. So, it would have to be something above 6, which would be supportive of the AUD or below 0, which would be negative for the AUD, (since it hasn’t been negative since 2013.)