AUD – Australian Dollar
The Australian dollar has been aided by positive market sentiment, emanating primarily from the strong economic data filtering out of the United States since last Thursday. Strong payrolls data was compounded by a record high in the US ISM services activity survey, further evidence of a strong economic outlook globally. This has seen the Australian Dollar rise from 0.7605 to 0.7661. As expected, the New Zealand Dollar has also benefited, rising from 0.7020 to 0.7070 which has seen the AUD/NZD cross trade sideways between 1.0810 and 1.0845.
Looking to the day ahead, the main release on the docket is the RBA monetary policy meeting for April. Markets are expecting the central bank to maintain their current monetary policy stance; a 0.1% cash rate and current anchoring of the 3 year government bond yield. Also of interest to Australian Dollar traders will be the ANZ Job ads for march, which are set to be watched closely over the next few months for insights into how the labor market adapts post JobKeeper. We are also expecting an announcement from the New Zealand government regarding a New Zealand-Australia travel bubble.
Having now rebounded off the early April low of 0.7530, the Australian Dollar has met firm resistance around 0.7670 handle. A break above this level could provide some impetus for a near term appreciation.
As we touched on above, the main story in markets over the last few sessions has been the positive signs of economic recovery flowing out of the world’s largest economy. Interestingly, despite the bumper payrolls report and record high ISM services survey, FOMC member Mester was erring on the side of caution in his recent comments. He insisted that the Fed needs to be ‘deliberately patient’ in their monetary policy approach and pointed to the fact that although the economic outlook is improving, they are still a long way off their targets. Mester put the recent payrolls reports into context; “We’re still almost 8.5 million jobs below where we were before the pandemic. So we need more of those kind of job reports coming out to actually make more progress than we’ve seen so far”.
In currencies, risk on currencies such as the Australian and New Zealand Dollar have been clear beneficiaries of the improvements in sentiment. The US dollar index was 0.5% lower as the S&P500 made fresh record highs. EUR/USD was up, rising from 1.1740 to 1.1820 on Monday whilst USD/JPY fell back below the key 110 handle to trade at 109.96.
In commodities, oil futures retreated 4% with copper rising nearly 4%.
AUD/USD: 0.7608 – 0.7698 ▲
AUD/EUR: 0.6438 – 0.6516 ▲
GBP/AUD: 1.8066 – 1.8284 ▲
AUD/NZD: 1.0772 – 1.0902 ▲
AUD/CAD: 0.9526 – 0.9641 ▼