Aussie business confidence to suppress AUD after Yuan’s devaluation disruptions

AUD/USD pair has been in continued supply when the PBoC came out and instigated what had been expected of them in as much of the poor performances of the economy of late. Australia's NAB business confidence is published with the business confidence for July coming at 4 versus 8.

The NAB business survey reports that in July business conditions and confidence moderated, reversing the most recent gains. In our view, the June survey looked a little strong - both the headline and the detail - pointing to the risk of a near-term reversal.

The current survey was in the field from July 27 to 31, following the recent turmoil in Greece and China.

The conditions index fell back 4pts to +6, still above the long-run average for this series of 0, dating back to 1989.

Looking through the month-to-month volatility, business conditions appear to have firmed in recent months, having slipped back at the turn of the year. In July, the three components of business conditions reversed, to be in line with readings for March through May: trading conditions, down 8pts to +11; profitability down 3pts to +7; and employment conditions, which continue to lag, down 2 pts to -1.

This bounce in trend conditions suggests that the more accommodative policy settings are having a positive impact. Interest rates were lowered in February and May, after the RBA had been on hold since August 2013. Moreover, the Australian dollar has moved sharply lower against the US dollar.