Australian Dollar Circles Ahead of CPI, RBA Gov

 
   By James Glynn 
 

        SYDNEY--The Australian dollar was little changed Friday ahead of a busy week of pressure points for traders that includes second-quarter inflation data and a speech by the central bank governor.
        At 0630 GMT, the Australian dollar was trading at US$0.7403, up from US$0.7384 late Thursday.
        Inflation data for the second quarter on Wednesday are expected to show the effect of rising fuel prices and higher import prices, but the Reserve Bank of Australia's policy-setting board is expected to ignore the headline data.
        Core inflation is tipped to be far more benign, reflecting weak wage growth across the economy and still sub-par economic growth, according to economists.
        Shane Oliver said a low reading on core inflation won't be enough for the RBA to contemplate an interest-rate cut at its next policy meeting in early August.
        Mr. Oliver forecasts underlying inflation to remain around a low 0.6% quarter-over-quarter or 2.3% year-over-year, but expects the RBA to keep watching the economy for longer before reviewing the level of the cash rate, now at a record low of 2.0%.
        "The inflation data is unlikely to be low enough to justify on its own, an immediate RBA rate cut," he said.
        Still, RBA Gov. Glenn Stevens' speech in Sydney on Wednesday holds some expectation that the central bank will adjust its commentary on the economy a little, with recent employment numbers showing surprise strength.
        The RBA has been forecasting a rise in the unemployment rate to around 6.5%, but instead it has fallen to 6.0% in June. It was 5.9% in May.
        Some economists say the RBA is likely to downgrade its warnings of weakness in hiring.
        Coupled with a fall in the Australian dollar to its lowest level in six years this week, a few things have gone right for the RBA, which is hoping for a recovery in the non-mining economy over the next year.
        Global risks have also abated after Greece's parliament approved a eurozone bailout this week, while U.S. Federal Reserve Chairwoman Janet Yellen indicated a preparedness to raise interest rates this year.
        John Peters, an economist at the Commonwealth Bank of Australia, said there are tentative signs that the RBA is feeling more positive that the weaker currency will act to support the economy.
        Still, pressure might grow on the RBA to follow its counterpart in Canada, which cut rates this week. The Reserve Bank of New Zealand is also expected to lower interest rates next week.
        A 50 basis point cut in interest rates in New Zealand next week can't be ruled out, said Paul Brennan, chief economist at Citigroup, Australia.
        "This week's 25 basis point rate cut by the Bank of Canada and next week's likely cut in New Zealand are reminders of how weak commodity prices are driving downward pressure on rates," Mr. Brennan said.
        He expects the RBA to cut rates again in November when it becomes clear the economy remains flat, and inflation pressures remain off the radar.
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        July 17, 2015 02:57 ET (06:57 GMT)

#FX
#Forex
#SaleForex
#AustralianDollarCircles
#AheadOf_CPI
#RBA_Gov