AUD Bounces Out of Friday's Hole
AUD
The AUD made some significant gains across almost all major currency pairs, making up for some of the lost ground experienced towards the end of last week. US 10 Year Bond Yields fell 7bps after a soft US Employment report dampened inflation concerns, as a result the demand for the USD dwindled, possibly being one of the major factors for the AUD rally. US Equities also had a strong performance, further supporting the AUD. The VIX, which is an index that measures the level of risk and fear within the market, dropped 9.0% over the weekend. The AUD commonly thrives in a market with positive risk sentiment, as such the movement could of also aided the AUD. Commodities also performed strongly over the weekend, with Iron Ore and Copper gaining 2.7% and 1.3% respectively, which as a commodity currency likely further supported the AUD. It looks like to be a relatively quiet day in terms of data, with investors mainly in waiting for China’s Trade balance likely to be released later this afternoon.
USD
The AUD/USD erased Thursday's losses, rebounding to trade at a rate of 0.7738 at time of writing. US Employment data failed to impress on Friday night, with only 559k jobs being added (vs exp 675K). The Unemployment Rate fell to 5.8% (vs exp 5.9%), however this was only due to an unexpected drop in the participation rate of 0.1%. US April Factory Orders also saw a decline of -0.6% (vs exp -0.2%). The data significantly reduced any inflation concerns, and gave the AUD room to capitalise on USD weakness. US Equities had a strong performance on Friday night, with the S&P500 and NASDAQ gaining 0.9% and 1.5% respectively. Due to the AUD’s recent high correlation with US stocks, this was also supportive of AUD in its march back north. Russian President Putin claimed that the US used the greenback as a tool of economic and political war, which as such undermined the currency, and countries should begin to consider using the EUR or other national currencies as a way to settle oil and gas transaction. No significant market reaction was experienced upon release of Putin’s statement, but markets will be watching closely to see how other countries respond. Markets in waiting for Thursday’s monthly CPI data to give a clearer indication on inflation expectations.
EUR
The AUD/EUR following suit, current trading at a modest 0.6361 at time of writing. European equities had a rather flat session with the DAX gaining 0.4%. European Retail Sales decreased by -3.1% (vs exp -1.5%), potentially also weakening the EUR. Markets are in waiting for the ECB Press Conference on Thursday, where they will also release their Monetary Policy Statement. Its expected that the ECB’s President Lagarde could have a more hawkish tone, and could release some more information in regards to the ECB’s QE program.
GBP
The AUD/GBP also up against Friday’s levels, currently trading in at 0.5465 at time of writing. The UK have announced that the vaccine rollout is set to expand to under 30s. If the UK Economy manages to return to a semi pre-covid state earlier than expected, markets could move as a result. The GBP looking at a quiet week ahead, with monthly GDP data scheduled to be released on Friday.
NZD
The AUD/NZD making some modest gains over the weekend, currently trading at a rate of 1.0734 at time if writing. The NZD is on a Bank holiday today, as such no data is scheduled to be released.