Multiple Central Banks Decisions in Focus this Week
AUD
AUD starts the first trading day in May on the backfoot as last week's close saw the AUD dip across most of the major G10 currency pairs with risk-aversion ruling a large portion of April’s trading as well as overarching USD strength. Factors like China’s covid outbreak and lockdowns, in addition to global interest rate rises as well as the Russia-Ukraine war developments have weighed heavily on market sentiment. Asian Equities finished largely in the green on Friday with the Shanghai Comp gaining 2.4% and the Nikkei followed suit, gaining 1.7% on the close. The ASX ended the week on a strong note, up 1.1% as tech stocks lifted the Australian share market. Data wise and domestically, there’s a lack of local data among the releases with lower-tier commodity price data YoY as well as MI Inflation gauge. Market participants will more than likely shrug off most releases as they anticipate tomorrow’s problematic scenario for the RBA (Reserve Bank) as the federal election looms on May 16th. Money market futures pricing in a rise of 15bps by the RBA tomorrow, though some analysts expect 40bps which would take to 0.50% OCR. If the RBA raises rates by only the expected 15bps, then the accompanying policy statement will take on more importance as markets try to gauge how aggressively the rates will move higher as the year plays out.
USD
AUDUSD clings to life after regaining the 0.71 handle on Friday and plummeting below the 0.70 handle to trade at 0.7072 this morning. US Equities extended their losses on Friday as volatile market conditions remained prevalent with the Nasdaq closing -4.2%, S&P down -3.6% and the Dow Jones finished closely behind, dipping -2.8%. Into the NY session on Friday, Chicago PMI for April printed at 56.4, down from 62.9 and below expectations of 62.0. Shortly afterwards, the University of Michigan Sentiment Survey for April was revised down to 65.2 from 65.7. Limited reaction to the data through the US session. Moving forward, it’s a busier week ahead, starting with the US Manufacturing PMI and Unemployment this week. Traders, however, are likely glued to the upcoming central bank events this week as the Fed is expected to deliver another interest rate hike on Wednesday evening.
EUR
AUDEUR gained some positive momentum on Friday with the pair regaining the 0.68 handle before hitting the ceiling and losing a cent, trading at a rate of 0.6705 this morning. European Equites closed out their session in the green with the DAX up 0.8% and the CAC closed with modest gains, up 0.4%. In early European data, the Eurozone inflation climbed to 7.5%, aligning with estimates. France inflation rose above expectations to 4.8%, while French HICP reached 5.4%. The German economy grew 0.2% in Q1, matching estimates. Finally, ECB Member Lane was on the wires saying that the ECB needed to take recent inflation data results into account, adding that the EU is not returning to low inflation. Looking ahead, it’s a busier week for the AUDEUR pair, starting with today’s German Retail Sales for March and a flurry of Eurozone PMI readings for April.
GBP
AUDGBP followed suit on Friday and continued a trading trend upwards, trading as high as 0.5726 before trading a cent lower this morning at 0.5620. The FTSE 100 index ended higher on Friday, supported by its gains in heavyweight commodity stocks, the UK blue-chip closing 0.5% higher. Data-wise and into the weekend, the ONS reporting that 9 in 10 adults (91%) noticed an increase in their cost of living between 13 and 24 April, up significantly from 62% at the start of November, with most common reasons were rises in fuel inflation (80%). The data released over the weekend will surely come to light as the BoE Monetary Policy Committee meet this Thursday and will decide whether to hike interest rates for the fourth consecutive meeting. Markets are pricing in a 0.25bps to an increase to 1%. The Bank will be facing a dilemma of balancing surging inflation against the growing expectations of a recession.
NZD
AUDNZD bucked the trend and maintained most of its recent highs with the Kiwi pair trading at a rate of 1.0942 at the time of writing. Broad Aussie dollar strength as well as recent commodity gains have helped AUD to ascendency. A busier week ahead for New Zealand data with the release of the Q1 Labour market figures in focus on Wednesday and is expected to show unemployment to fall around 3% from a record 3.2% in the last three months of 2021. Wage inflation was expected to have accelerated in the first quarter, from an annual rise of 2.8 percent in the December quarter.