Forexpros – The Australian dollar rallied against its U.S. counterpart on Friday, as investors confidence was boosted after data showed that China’s economy expanded in the second quarter.
AUD/USD hit 1.0099 on Friday, the pair’s lowest since June 29; the pair subsequently consolidated at 1.0224 by close of trade, up 0.27% on the week.
The pair is likely to find support at 1.0099, Friday’s low and resistance at 1.0291, the high of July 6.
Market sentiment was boosted Friday after data showed that China’s gross domestic product expanded 7.6% in the second quarter, in line with expectations and better than the slower rates of growth some investors had feared.
But investors remained cautious after ratings agency Moody’s downgraded Italy’s sovereign debt rating late Thursday, citing doubts over the government’s ability to enact badly-needed reforms.
Despite the downgrade, Italy managed to successfully auction the maximum EUR 5.25 billion of two and five-year bonds on Friday, but the yield on the country’s 10-year bonds climbed above 6% following the auction.
In the U.S., data on Friday showed that consumer confidence unexpectedly dropped to the lowest level in seven months in July.
The University of Michigan said its index of consumer sentiment fell to a seasonally adjusted 72.0, from 73.2 in June, confounding expectations for an increase to 73.4.
A separate report showed that U.S. producer price inflation ticked up 0.1% in July, against expectations for a 0.5% decline.
The data came after Wednesday’s minutes from the Federal Reserve’s June meeting showed that few policymakers believed more asset purchases would be necessary to support growth in the economy.
In the week ahead, investors will be focusing on testimony by Federal Reserve Chairman Ben Bernanke, amid speculation over the possibility of more quantitative easing from the central bank.
Meanwhile, the Reserve Bank of Australia is to publish the minutes of the July meeting.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 16
The U.S. is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. The country is also to release official data on business inventories and manufacturing activity in New York.
Tuesday, July 17
The RBA is to publish the minutes of its July meeting, which outline the reasons for the monetary policy decision and discuss the economic outlook. Australia is also to release official data on new motor vehicle sales.
Later Tuesday, the U.S. is to publish official data on consumer price inflation, as well as reports on the capacity utilization rate and industrial production. In addition, Federal Reserve Chairman Ben Bernanke is to testify on the on the bank’s monetary policy report before the Senate Banking Committee in Washington.
Wednesday, July 18
The U.S. is to publish official data on building permits, an excellent gauge of future construction activity, as well as a report on housing starts. The country is also to release government data on crude oil stockpiles.
Meanwhile, Federal Reserve Chairman Ben Bernanke is to testify for a second day on the on the bank’s monetary policy report before the Senate Banking Committee in Washington.
Thursday, July 19
Australia is to release a report on business confidence, an important indicator of economic health.
Later Thursday, the U.S. is to publish government data on initial jobless claims, as well as reports on existing home sales and manufacturing activity in Philadelphia.
Friday, July 20
Australia is to round up the week with official data on import prices, which contribute to overall inflation.
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