FUNDAMENTAL AUSTRALIAN DOLLAR FORECAST: BEARISH

• The Reserve Bank of Australia is thought unlikely to cut rates, but is likely to sound dovish
• Australian growth figures may well disappoint given business investment weakness
• Bullish trade headlines might negate both and boost the Aussie, but they’re unpredictable

In the coming week Australian Dollar markets might just be able to look past the US-China trade story, at least for a while, as they contemplate a packed period of local economic news. Whether this will be good news for the currency’s bulls, however, is a very open question.

Out on front of course will be Tuesday’s monetary policy decision from the Reserve Bank of Australia. Market positioning is at present quite emphatic that no move is coming, and the Official Cash Rate will remain at its record, 0.75% low once the central bank’s deliberations are over. However, the RBA itself conceded in the minutes of its last meeting that the case for an interest rate cut could be made then, an admission which knocked the Aussie earlier this month. Given that little has clearly changed for the better since, the chance of a cut on Tuesday must still be ‘live’ even given those market doubts.

GROWTH FIGURES MAY BE UNDER A CLOUD

Official Gross Domestic Product figures for the third quarter are due on Wednesday. The economy expanded at a modest 0.5% quarterly rate in the three months to June and may struggle to better that this time. Global trade, growth and consumption slowdowns are likely to make their mark, with particular reference to China, biggest customer of Australia’s titanic raw-material export machine.

Treasurer Josh Frydenberg talked darkly of significant global headwinds in Parliament on Thursday, which hardly inspires too much confidence in the data, and business investment has been pretty weak over the quarter.

There are some other potential Aussie movers coming up, from Chinese Purchasing Managers Index data, both official and private and domestic building approvals which have been under pressure.

Of course, those US-China trade war headlines are all-too-likely to set the pace in AUD/USD, and news-flow from that quarter is very difficult to predict. However, given that the RBA will almost certainly strike a dovish tone even if it doesn’t cut rates, and that GDP may struggle to impress, it’s a bearish call this week on the basis of what we can know. The pair’s deepening downtrend will likely stay with us