Greenback Stumbles on Weak US Jobs Report

AUD

The Aussie Dollar kicks off the week with a bang, opening notably higher against most majors after further improvements in global risk sentiment. Asian equities were mixed on Friday, with the Hang Seng up +1.5%, the KOPSI down -0.3% and the Nikkei and Shenzhen closed. The ASX traded +0.6% higher as consumer discretionary and real estate gained 2.0% and 1.6% respectively. Commodities lent a helping hand, with Iron Ore +0.7% and Copper +1.7%. Little meaningful data today, with tomorrow afternoon bringing the Aussie Dollar’s big event for the week – The RBA’s Cash Rate decision. The recent uptick in Aussie consumer prices hasn’t changed the consensus view among economist that the RBA will keep the Cash Rate on hold again at 4.35%. However, recent data suggest we should expect a more hawkish tilt to the RBA’s communications. If the Board expresses an increased level of concern about the persistence of inflation, we can expect further AUD strength. The Cash Rate decision and RBA Monetary Policy Statement will be released at 2:30pm, while the RBA Press Conference will occur at 3:30pm.
 

USD

AUDUSD spiked to 2-month highs of 0.6647 on Friday evening off the back of a weaker-than-expected US jobs report. The pair kicks off the week at 0.6610. A strong end to last week on Wall St. saw the Nasdaq close +2.0%, the S&P 500 +1.3% and the Dow Jones +1.2%. To the US labour market, Friday’s data indicates jobs growth slowed markedly in April and wage pressures eased. That’s likely the ‘bad-news-is-good-news’ data the Federal Reserve wants to see if it’s to begin cutting interest rates later this year. The Unemployment Rate unexpectedly ticked up to 3.9%, while notably, Average Hourly Earnings rose at their slowest pace in 4 years (+0.2% m/m). The Greenback weakened in the aftermath, being kicked while down by the following contractionary ISM Services PMI of 49.4 (expectations were an expansionary 52.0). We’ve got a relatively quiet week ahead for the US Dollar, with a couple of FOMC Members speaking on the economic outlook overnight. The main event this week will be the Preliminary UoM Consumer Sentiment Survey, set to be released late Friday evening.
 

EUR

Improving global risk sentiment sees AUDEUR remain at levels unseen since early January, having peaked at 0.6159 on Friday evening ahead of this morning’s open at 0.6143. The DAX and CAC gained +0.6% and +0.5% in Friday’s session. We’ve got a quiet week ahead in terms of Eurozone data, with no hard-hitting releases expected. Regarding the European Central Bank, the combination of weak growth and falling prices will likely allow the central bank to begin cutting interest rates before the US Federal Reserve, with the first cut potentially occurring in June. Euro weakness is unlikely to stand in the way of the ECB delivering a rate cut, with President Lagarde recently reiterating that the central bank does not target the exchange rate, although it is taken into consideration when forecasting growth and inflation. For the AUDEUR pair, this could mean continued healthy gains back to pre-2023 territory.
 

GBP

AUDGBP rallied to near-4-month highs of 0.5274 on Friday afternoon before pulling back a bit to this morning’s open at 0.5268. The FTSE gained +0.5% in Friday’s session, while UK banks will be closed today in observance of Early May Bank Day. A few quiet days ahead, with the main event this week being the Bank of England interest rate decision, Monetary Policy Report and Governor Bailey’s speech… All of which will occur on Thursday evening. While the Official Bank Rate is expected to be held again at 5.25%, an optimistic air is expected at the meeting as the central bank inches towards the first rate cut in the current cycle, potentially in August. Thursday’s meeting will provide an opportunity for officials to change the narrative on UK monetary policy, although the committee will likely tread carefully.
 

NZD

AUDNZD gave up little ground over the weekend, having reached 1.1023 highs in Friday’s late morning before trending down to this morning’s open at 1.1000. We’ll see three data pieces from the Kiwis this week, although all will be relatively low-tier and likely to have little impact on the NZD. Later this morning, we’ll see ANZ Commodity Prices m/m followed by the Global Dairy Trade (GDT) Price Index on Wednesday, then the BusinessNZ Manufacturing Index on Friday.