Subdued Currency Markets, AUD Holding Firm
AUD
The AUD has been trading in tight ranges, sitting at similar levels to yesterday against most major pairs. The Aussie budget for the 2021-22 fiscal year was released last night and the Australian Government announced a forecast budget deficit of A$106.6B. Currency markets were largely unmoved with the main point that the Government expects inflation to cross 2.0% in 2022-23, echoing sentiment from Governor Lowe and the RBA. Just before the budget, China published April’s Consumer Price Index (CPI) and Producer Price Index (PPI) data wherein the headline CPI missed the forecast to come in at 0.9% (1.0% forecasted). PPI, jumped to the highest since October 2017, with potential further inflation as prices increase in many parts and goods such as home appliances, cars, and computers due to the continuing global semiconductor chip shortage. Higher US Equities took a tumble overnight with the S&P 500 down -0.9%, Dow Jones down -1.3%, while the NASDAQ managed to fare better but still down by -0.1%. The AUD was supported by commodities, particularly by recent strong performer Copper which is up +1.7%, Gold and Iron Ore lagging behind to be up +0.2% and down -0.1% respectively. Not much ahead on the domestic data calendar as markets look towards US inflation data tongiht.
USD
The AUDUSD maintains its position above the 78 figure to trade at a similar level to yesterday morning, sitting at 0.7838 at time of writing. US Treasury 10-year yields increased by 2 bps to 1.62% overnight, whilst Crude Oil made minor gains +0.8% and trades at $65.40 a barrel this morning. Little other data out of the US, with Currency markets remaining subdued, possibly in anticipation of US CPI data for April that will be released later tonight. Headline inflation numbers should receive a boost from gasoline prices in recent months, as core figures could show strong price gains in comparison to pandemic levels seen last year.
EUR
The AUDEUR following suit to sitting at similar levels to yesterday, trading at 0.6451 this morning. The European Equity markets took a hit with the DAX and FTSE both down by -1.8% and -2.5% respectively. The European Union’s Economic Forecast will be released tonight with the report forecasts serving as the European Commission's basis for evaluating economic performance and trends of EU member states.
GBP
The AUDGBP has been flat as well, trading close to yesterday's open, currently sitting at 0.5542 this morning. Governor Bailey spoke early this morning, he talked about the move away from the use of Libor (London Inter-bank Offered Rate, the benchmark interest rate at which major global banks lend to one another). He said using robust overnight risk-free rates will help to create a more resilient and transparent financial system, though this didn’t have any impact on currency markets. At 4pm this afternoon, we will see some Preliminary Quarterly GDP data, with consensus forecasts looking for a print of -1.7% for first quarter growth. BoE Governor Bailey is also due to speak again tonight.
NZD
The AUDNZD again followed the same story of trading in the same ranges, if not marginally higher to trade at 1.0791 this morning. The travel bubble between NSW and NZ is back in action as flights between NSW and New Zealand resumed, after two positive COVID-19 cases in Sydney suspended travel between the two locations. Little data has come out of New Zealand over the last few days, and that looks to continue with only the Food Price Index (FPI) being released tomorrow and the Business NZ Manufacturing Index on Friday to provide some guidance.