AUD Under Pressure as Unemployment Rate Rises

AUD

The Aussie Dollar closed mostly lower across the board after yesterday morning's disappointing unemployment data, where the unemployment rate rose to 3.7% in April, missing estimates of 3.5%. The ABS data highlighted that the employment to population ratio decreased to 64.2% while the participation rate remained at 66.7%, the AUD dipping after the data. Asian equities pushed higher on Thursday with the Hang Seng up 0.4% and Nikkei adding 1.6%. The ASX closed 0.5% higher as tech stocks rallied. A negative turn in sentiment toward the Chinese Yuan continued overnight created by; domestic outflow of capital, China's low interest rates no longer giving it a yield advantage, and geopolitical risk from G7 allies producing new measures against China. The CNYUSD has now broken up through the much maligned 7.0 mark which has flow-on negative effects for AUD. The ABS has released data around April’s employment change, highlighting the employment to population ratio decreased to 64.2% while the participation rate remained at 66.7% as data underperformed expectations, the AUD performed poorly yesterday. No local data to end the week.

USD

AUDUSD opened lower at 0.6622 as the USD was stronger across the board as indicated by the 0.6% rise in the DXY. General risk sentiment remained positive overnight which saw the NASDAQ close +1.5%, while the S&P 500 and the Dow Jones closed +1% and 0.3% respectively. US 2-year yields rose 10bps to 4.25% as investors speculated on a June rate hike, while crude oil fell 1.2% to $72 a barrel. The US dollar held near a seven-week peak on Thursday, after president Joe Biden and US Congress Republican Kevin McCarthy worked towards avoiding a damaging debt default, while the Aussie Dollar slipped after disappointing jobs data. US weekly jobless claims were marginally better than expected with initial claims at 242k against expectations of 251k while continuing claims were 1.799 mio compared to expectations of 1.820 mio. Tonight a speech from Fed Chair Powell will round out the week.

EUR

AUDEUR opens flat this morning at 0.6149, having recovered steadily from the dip after yesterday's disappointing local employment report. European equities had a good session with the DAX adding 1.3% and CAC up 0.6%. Yesterday was a French and German bank holiday so there was little activity on information releases however ECB President Lagarde will speak on Saturday on Post Pandemic Challenges: High Inflation, High Indebtedness and Financial Stability.

GBP

AUDGBP opened slightly higher at 0.5336, recovering from yesterday's low of 0.5313. Last night the Monetary Policy Report Hearings took place, during which the BOE Governor and several MPC members testified on inflation and economic outlook before the Parliament's Treasury Committee who disclosed reports that 100B a year of QT (quantitative tightening) could disturb market liquidity so they decided on 80B. No data of note due from the UK tonight, with MPC member Haskel due to speak.

NZD

AUDNZD closed strongly down for the third day in a row, opening at 1.0637 after failing three tests of the 1.06 level in the last 24hrs. Yesterday the Budget Economic and fiscal Update 2023 was released showing data from the past year. Annual consumer price inflation peaked at 7.3% in June 2022, and the RBNZ lifted interest rates to reduce strong domestic demand. Activity is now weakening and will be soft throughout 2023. However, compared to the Half Year Update, the Treasury now expects a more moderate slowdown in activity over the next 12 months. Growth slows to 1.0% in the June 2024 year, and averages 2.7% thereafter.