Thursday was another day of very tight ranges for the AUD/USD pair, though with a near 400-point rally in the DJIA, it really should have done somewhat better. Having opened around 0.7755, only 25 pips separated the high and low of the day and by the close of business the AUD finished marginally down against the USD, a little more against the CAD, GBP and NZD but up against a very weak EUR. This morning in Europe, the Aussie Dollar has rallied up to US 78 cents for the first time in a month and AUD/CAD is back up at 98 cents to leave the AUD the best performer on the day so far.
Overnight we have seen the latest monthly figures from Australia’s largest trading partner. China reported a surprise monthly trade deficit in March, the first time in 13 months, as exports dropped while import growth accelerated due to robust domestic demand. China's trade balance swung to a deficit of $4.98 billion from a $33.7 billion surplus in the previous month. The country last reported a monthly deficit, of $11 billion, in February 2017. Exports declined 2.7% in March from a year earlier, following a 44.5% surge in February, the General Administration of Customs said. Imports in March expanded 14.4% from a year earlier, compared with a 6.8% increase in February. The monthly numbers in the first quarter of any year should always be treated with some caution as they can be distorted by the timing on the Lunar New Year holidays. Taking the quarter as a whole, exports rose 14.1% from a year earlier, while imports climbed 18.9%, resulting in a surplus of $48.39 billion.
In its latest Financial Stability Review released this morning, the RBA says strong global economic conditions over the past six months suggests asset prices have surged because investors "see little chance of adverse outcomes". It warns that "Investors have also taken on more risk in recent years, making them more susceptible to large losses if there were a generalised fall in asset prices… The falls in global equity prices in recent months have provided a timely reminder that asset prices can fall quickly with price movements exacerbated by pro-cyclical investor behavior.” Although the review says Australia's financial system remains ‘resilient’ in its ability to withstand shocks, it does raise concerns about high levels of household debt. "The high level of household indebtedness increases the risk of a rise in household financial stress amplifying a shock to the economy… The higher debt levels raise concerns about the resilience of a range of borrowers to any adverse shocks, particularly as global monetary policy accommodation starts to be unwound." The Australian Dollar opens in North America this morning at USD0.7805, with AUD/NZD at 1.0560 and AUD/CAD0.9800.