AUD - Australian Dollar
The Australian dollar crept upward through trade on Tuesday, buoyed by improvements in broader risk tones and an ongoing recovery in oil prices. While moves across currency markets were largely muted the AUD consolidated its push back above 0.64 touching 0.6475 before correcting lower. The RBA offered little to excite investors, maintaining the cash rate at 0.25% while making only a small change to its QE program. The board elected to broaden its rules on acceptable collateral to include investment grade corporate bonds in a bid to smooth market functionality. Investors largely ignored the announcement while also disregarding an ABS report that showed job losses in the 5 weeks since the lockdown began have risen to 7.5%. Markets had largely priced in the additional hit to the labour market and when we consider 6% of those jobs were lost in the first 3 weeks of the lockdown the marked slowdown in the pace of job losses suggest the governments fiscal stimulus measures are providing the stopgap needed to maintain employment through the short term. That said, there are concerns the unemployment rate could drop sharply over the coming months, especially if consumers are slow to respond to easing social distancing restrictions.
Attentions today turn to retail sales data, albeit the data provides a backward look at consumer spending in March and will fail to take into account the full lockdown period. Instead we turn our focus to tomorrow’s Trade Balance print as a marker offering direct insight into currency demand, while risk sentiment will continue to act as the driving force governing direction in the interim.
The Euro fell sharply overnight down half a percent and back through 1.09 following a surprise ruling by Germany’s constitutional court in review of the ECB’s current asset purchase platform. While they agreed the ECB can continue the current program it must conduct a “proportionality assessment” throughout the next three months as a means of quantifying asset purchases and ensuring the purchase of government bonds remain consistent with each countries share of population and GDP within the Eurozone and does not become a mechanism funding governments fiscal programs. The decision reduces the scope and access to peripheral bonds markets and hampers the ECB’s ability execute is emergency pandemic driven QE program.
The US dollar index rallied on the back of Euro losses, while easing restrictions across some States helped bolster demand for US stocks and a surprising stable services print helped ease concerns surrounding the health of the broader US economy.
Attentions today turn to ADP private payroll data and EU economic forecast as the key macroeconomic drivers while risk demand and uncertainty continue to steer broader direction.
0.6370 - 0.6530 ▲
0.5850 - 0.5980 ▲
1.9020 - 1.9480 ▲
1.0580 - 1.0720 ▲
0.8980 - 0.9120 ▼