AUD Slips on Soft Employment Data
AUD
A surprise increase in the Unemployment Rate to 4.1% has prompted a moderate negative reaction in the Aussie Dollar, with stronger-than-expected employment growth (attractive at face value) driven entirely by part-time hires. Employment growth of +35.8k in April was stronger than forecasts of 22.4k, but the good news stops there. Full-time positions with their higher wages fell by -6.1k, weighing on the AUD as the impacts of the RBA’s interest rate hiking campaign continue to take effect. Economists largely anticipate it’s unlikely the RBA will cut rates more than once, if at all, this year… Even if the US Federal Reserve delivers 75 bps worth of easing (potentially 3 cuts). If this were to occur, markets would expect further upward progress for the AUDUSD pair. The ASX closed +1.7% higher yesterday led by +3.4% gains in real estate and 3.3% gains in IT. Asian equities were also stronger, with the Hang Seng up +1.6%, the Nikkei up +1.4% and Shenzhen up +0.4%. No domestic data today, although China (Australia’s biggest customer & the world’s second-largest economy) will release Industrial Production, Retail Sales and Fixed Asset Investment data for April at midday. The figures are all expected in strong territory, even stronger than last month’s positive results. This comes after China’s imports and exports increased in April, after contracting in March, pointing to improving domestic and overseas demand. A stronger Chinese will likely lend the Aussie Dollar a helping hand.
USD
AUDUSD reached 4-month highs of 0.6714 in the late morning yesterday before retreating off the back of Australia’s weak labour data. The pair steadily withdrew to 0.6653 lows in the late evening before climbing back to this morning’s open at 0.6680. Wall Street drifted a little lower, with the Dow -0.1%, S&P 500 -0.2% and Nasdaq -0.3%. No notable US data overnight, with somewhat-varying signals from FOMC Members. Member Bostic express he’s pleased with inflation progress, although the Fed is ‘not yet there’. Member Mester indicated she believes rates should stay higher for longer in the US, preferring to see more evidence that inflation is easing. FOMC Member Waller is set to speak on payment innovations this evening, while Fed Chair Powell will speak in the early morning on Monday. No major US data over the next few days.
EUR
AUDEUR briefly touched 0.6164 highs in the late morning yesterday, before falling off in the aftermath of Australia’s soft labour data. The pair then traded between 0.6149 and 0.6128 ahead of this morning’s open at 0.6145. The DAX ended yesterday’s session -0.7%, while the CAC finished -0.6%. Yesterday’s European Central Bank Financial Stability Review indicated Euro area conditions have improved as recession risks decline, although market remain exposed to macro-financial and geopolitical risks. Tight financial conditions also continue to test the resilience of vulnerable Euro area households. Tonight, we’ll see Final CPI figures for the Eurozone. The next major release will be their Flash PMIs, next Thursday.
GBP
Choppy trading for the AUDGBP saw the pair range between 0.5273 and 0.5259 throughout most of yesterday’s session, having reclaimed ground in the last hour to open at 0.05271. The FTSE ended yesterday’s session -0.1% lower. Light on the data front, with only MPC Member Greene speaking overnight, suggesting the burden of proof needs to lie in UK inflation persistence continuing to wane. Tonight, MPC Member Mann will speak at an economics conference in Manchester. The next major events will be next Wednesday, with Bank of England Governor Bailey speaking in the early hours, and UK CPI data in the afternoon.
NZD
AUDNZD reached 1.0937 highs yesterday afternoon before gradually declining in the overnight session to open this morning at 1.0907. This morning’s Producer Price Inflation (PPI) Input & Output figures each came in stronger-than-expected, printing at +0.7% and +0.9% respectively. No response from the currency market. Next Wednesday will bring the Reserve Bank of New Zealand’s Official Cash Rate decision, as well as the RBNZ Monetary Policy Statement and Press Conference.