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Support intact as Aussie bounces off 0.70 U.S. Cent handle

AUD - Australian Dollar

The Australian dollar bounced off near two-month lows, reversing the weeks downward spiral Friday to extend and stretch above the psychological 0.70 U.S. cent handle. Having touched 0.6993 in thin ANZAC holiday trade the AUD recovered through Friday as investors looked for buying opportunities while giving up the USD in the wake of softer than anticipated inflation data. Despite stronger than anticipated first quarter growth, advanced GDP reports showed Core Personal Expenditures; the Fed’s preferred measure of inflation, remained stagnant throughout the first three months of the year, retracting significantly on Q4 2018 numbers. The dour inflation outlook was enough to overshadow the strong growth print, encouraging investors to take profits on USD after a week of gains that saw the AUD give up one and a half U.S. cents.

The AUD now sits at the bottom end of recent ranges and while 0.70 remains a staunch handle for support our attentions turn to a host of key data sets this week as markers for guidance running into May. With little of note on hand today, Chinese Manufacturing PMI headlines Tuesday’s docket, U.S manufacturing and a Fed policy meeting dictate terms on Wednesday while domestic building approvals and US labour market data Friday steer direction into the weekend.

Key Movers

The US dollar upturn stalled on Friday despite a stronger than anticipated first Quarter GDP print. The economy grew at a much quicker pace than analysts expected, growing at 3.2% in the three months to March 31st. The strong read however was overshadowed by softness across key inflation indicators. The PCE index showed price pressures remain stagnant, leaving little incentive for the FOMC to shift away from a cautious and dovish bias. Despite the softness across inflation there are still signs the US economic growth story will continue through Q2.

Sterling suffered its worst weekly performance for April last week as Brexit talks stalled and the US dollar rebound continued. Despite some relief Friday, the Pound appears stuck toward the lower end of recent ranges, struggling to break back toward 1.32-1.33. With little signs Theresa May is making progress with lawmakers to advance her Brexit agenda we anticipate Sterling will remain range bound, testing moves toward 1.2850.

Expected Ranges

AUD/USD: 0.7000 - 0.7130 ▲

AUD/EUR: 0.6250 - 0.6350 ▲

GBP/AUD: 1.8050 -1.8450 ▲

AUD/NZD: 1.0520 -1.0650 ▼

AUD/CAD: 0.9420 - 0.9520 ▲