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AUD strengthens on Chinese Data, boosting market risk appetite. Awaits Jobs Data

Published April 18, 2019

Author: Steve Oram

AUD spiked vs the USD yesterday on some better than forecast numbers out of China. Q1 GDP March industrial production and March retail sales all beating expectations, providing a lift in the AUDUSD further.

US also had a some second tier data releases and a few FED speakers overnight, with the most notable being month on month trade balance deficit which also beat (came in under) the markets expectations.

The cross however failed to maintain its test of the 200-day average with much enthusiasm – which is around the 0.7190 levels. This morning starting back close to yesterday’s opens again.

The March Australia jobs report is due today at 11:30.

This will be keenly watched as the RBA have flagged Unemployment as one of the measure it will use to determine the path of Interest rates. Overall, the Australian jobs market only has seen two months of contraction since October 2016.Indeed even with Trade tensions our economy has ground along adding jobs for eight consecutive months.

Expectation is for the unemployment rate to hold at 5.1%, if so the Reserve Bank of Australia will look for more evidence that the labour market remains a source of stability, since wage growth remains weak and their measure of inflationary pressures have only just started to stabilize across other developed economies.

Like the Reserve Bank of New Zealand, the RBA is stuck on hold when it comes to policy expectations for the first half of the year despite market calls for cuts.

Speaking of the NZD yesterday, as Q1 2019 and YOY inflation numbers missed expectations. Q1 actual 0.1% (against 0.3 % expected) and YOY 1.5% (against 1.7% expected). The NZD lost nearly a cent immediately on the news, The AUD fell in tandem on the release before receiving its China data boost at lunchtime.

Given the long weekend ahead of us, expect  currency to range trade as markets look to square up. If that is, there are no surprises from the mornings Jobs data. Should we start to see numbers that support the view that the RBA’s next move on interest rates will be a cut then AUD could tumble back to the lower end of the 0.7050 – 0.7200 trading band.

GBPUSD flat on the overnight market. UK inflation rate held steady at 1.9% (v 2% expected number).

EURUSD, a little higher on the session with Eurozone CPI and core CPI coming in at 1.4% and 0.8% respectively, and both meeting market forecasts.

No commentary tomorrow or Monday but we’ll be back on board Tuesday,

Happy Easter to you all.