US Data See-Saws on Road to Recovery
AUD
The AUD continues to fight back, gaining some ground against most major currency pairs, except for the NZD. US Equities had a strong finish to the week, due to its correlation with US Stocks, this likely added to the AUD strength. US 10 Year Bond Yields were down 3 bps to 1.63% which may have also opened the door to AUD upside. Surprisingly the VIX, which investors use to measure the level of risk and fear within the market, dropped by -18.7%, despite India’s recent Covid Surge and the rising conflict in Israel. The AUD has been know to thrive with positive risk sentiment and market confidence, as such the AUD gains could be largely contributed to the decreasing fear levels and improving investor confidence. Commodities finished the week rather soft with both Iron Ore and Copper down -1.8% and -0.7% respectively, however this didn’t seem to stop the AUD from making back some gains. Iron Ore was at record highs at the back end of last week and Chinese demand for Australian Iron Ore continues to increase despite the recent trade tensions with China. Investors will be watching China Today, as it is scheduled to release their Yearly Fixed Asset Investment Yields, Industrial Production, Retail Sales and Unemployment Rate around mid-day.
USD
The AUD/USD made some significant gains currently trading in at 0.7782 at time of writing. After what was a rather volatile week, US Equities finished strong, with the S&P500 and NASDAQ gaining 1.5% and 2.5% respectively. The significant Equity gains likely added to the AUD strength coming into the weekend. US data on Friday was soft, monthly US Retail Sales significantly missed the mark, coming in at 0.0% (vs exp 1.0%) down from 10.7%. Monthly Industrial Production data also fell short coming in at 0.7% (vs exp 0.9%). The USD weakened significantly after the release of the data, allowing the AUD to make back some lost ground. The University of Michigan raised its inflation expectations with 1 year up from 3.4% to 4.6%, also contributing to the US weakness. The USD looking at a quite week, with unemployment claims scheduled to be released on Thursday.
EUR
The AUD/EUR also making some gains over the weekend, currently trading in at 0.6404 at time of writing. European Equities finished strong with the DAX and FTSE gaining 1.4% and 1.2% respectively, however this failed to stop the AUD from taking back some lost ground. The EU currently in discussion of which countries it will open to international travel and what will be required before arrival. As more countries begin to open their borders and market confidence returns, the AUD could gain further strength.
GBP
The AUD/GBP also making gains from last week's 6 week lows, currently trading at a rate of 0.5516 at time of writing. The UK on tenterhooks at the moment as British health workers escorted by the army went door-to-door doing covid test in hope to contain a fast-spreading Covid Variant that could threaten plans to lift lockdown restrictions next month. Investors look to tomorrow's Unemployment data scheduled to be released, some market movement can be expected if the results greatly miss expectations.
NZD
The AUD/NZD being one of the only currency pairs to have lost ground over the weekend, currently trading at a rate of 1.0738. The New Zealand and Australian travel bubble continues to set a standard and example for future international travel. The NZD looking at another quite week with Quarterly PPI data scheduled for release on Thursday.