Past week was marked by a strong pull back in the manufacturing sector as reported through AIG manufacturing performance report. The index has turned strongly to the expansion territory above 50 at 51.5 from 41.6 in May.
The construction activity is still contracting (below 50) but at a slower pace. The AIG performance of construction index came less negative at 35.5 in June, compared to 24.9 in May.

Building approvals are still decreasing as forecasted by the AIG construction index and may weigh negatively on the Australian housing sector for the third Quarter 2020.
The May data came at 12736 on total dwelling units, compared to 15239 in April. A decrease by 16.4% from previous month, and by 11.6% year over year.

Next week major events on the economic calendar would be AIG Services index on Monday which is highly expected to come greater than previous number of 31.6 indicating some recovery in the services sector before full reopen of the economy and back to normal.
The next major event to come is the Reserve Bank of Australia Cash rate decision.
Generally, no change is expected in the cash rate, as mentioned many times by the RBA Governor Philip Lowe, Rates are going to stay low for longer.
Regarding other Monetary policy tools, the RBA is continuing to target three years Government bond yield at 0.25% and is ready to buy Government bonds to reach its target.
But on the other side we notice a decrease in the pace of asset purchases by the RBA, and a stable Balance Sheet at around 280 Bln $AUD.

The decrease in the pace of money printing is also observed through money supply data.
M3 money supply in May has only increased by 0.24% on a month on month basis, compared to previous increases of March and April at around 2.7% MoM.

This double Bias in monetary policy measures; maintain low interest rates Vs slower money printing, is to come in response to some early signs of economic recovery.

Among them we can site:
– Strong PMI data, business surveys, and leading indicators in CHINA, a major trade partner for Australia.
– Strong pull back to the expansion zone above 50 in Australian PMI data (MARKIT, Commbank),
– Increase in oil prices and demand
– Easing lockdown measures, and partial reopen of the country.