Poor US Employment Data Surprises Market
AUD
The AUD displayed some strength over the weekend as it gained across most major currency pairs as risk appetite strengthened, and downbeat job data was released in the US (see below). Local Equities and Commodities were mixed on Friday with the ASX and Nikkei posting gains, while the Shanghai Comp took a loss of -0.7%. Gold was up 0.9% and Copper was up 3.2%, the only two notable commodity gains. Australia’s final reading of nominal Retail Sales for March will be released today. The reading should be close to the preliminary estimate of +1.4% MoM, which would imply Q1 sales were broadly flat, or fell slightly, in nominal terms. NAB Business Survey for April also on the calendar today and will be expected to show ongoing strong business conditions in Australia. Tomorrow night's Annual Budget will be delivered by Treasurer Frydenberg in what will be the biggest piece of local economic data for the week, with focus expected around aged care, childcare and housing affordability.
USD
The AUD capitalised on the US dollar weakness over the weekend as it trades at 0.7855 at the time of writing, currently at a 3-month high. The gains were due to weak US employment data, a reduction in US yields and heavy pressure from other currencies, the DXY falling 0.8% and now only 1 percentage point above the 3 year low. US Equities had a strong session with all three major indices posting gains which set the scene for the AUD's advance. The US economy only added 266k jobs in April, down from a significantly revised lower figure of 770k from last month and well below expectations of 1.000 mio. The Unemployment Rate unexpectedly rose from 6.0% to 6.1% against expectations of a decline to 5.8% though this was partially the result of a 0.2% increase in the participation rate to 61.7% compared to forecasts of 61.6%. Average hourly earnings surprised by rising 0.3% YoY compared to expectations of -0.4% with labour shortages seen as a possible reason. Looking to the week ahead, and the highlights will be Wednesday night's inflation data followed by Friday night's Retail Sales data.
EUR
The AUDEUR pair trading at 0.6454 at the time of writing, 4 pips up from Fridays open. Both currencies almost equally trading with the other as both took advantage of the downbeat US employment data over the weekend. European equities had a strong session, FTSE up 0.8% and the DAX up 1.3%. No-noteworthy data on the Calendar today, Germany and France CPI on Wednesday along with EU Economic Forecasts.
GBP
The AUDGBP pair trading at 0.5597 at the time of writing, a mixed session over the weekend, neither currency gaining on the other as both major currencies benefit on a lack of US dollar demand, set to continue into the week. UK Equities had a strong session, the FTSE still maintaining its post-covid highs as it closed at 7129.71. Last Thursday’s monetary policy decision from the BOE provided no new catalyst for further excitement, Governor Bailey’s remarks suggest the market has already seen and heard all of the optimism it is likely to get from the BoE without progress in realising the bank’s bullish forecasts, which elevates the importance of this Wednesday’s first quarter GDP data. Bailey is due to speak a couple of times in the week ahead.
NZD
The AUDNZD also found some strength to make gains over the weekend as it trades at 1.0775 at the time of writing. Only minor gains over the weekend as all major currency pairs gained against the weaker US dollar. The recent Sydney COVID restrictions and travel bubble closure seemed to have little effect on this pair, the travel bubble back in full swing this morning. A quiet week ahead for Kiwi data, markets await next week’s Annual Budget release on Friday and further US Dollar sentiment.