Home Daily Commentaries Aussie dollar trades above 67 US cents 

Aussie dollar trades above 67 US cents 

Daily Currency Update

The Australian dollar is slightly stronger this morning when valued against the Greenback. The AUD/USD pair climbs to a two-week high on Friday on the back of US Nonfarm Payrolls exceeding expectations. Last week the Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points (bp) last Tuesday to 3.85% after first-quarter Consumer Price Index (CPI) came in at 7% year-on-year to the end of March, well above the 2-3% mandated target band. Australia’s trade surplus clocked in at an astonishing AUD 15.27 billion for the month of March, the second-largest boost on record. Iron traded on both the Singapore and Dalian exchanges have been moving lower but this doesn’t impact Australia’s top export too much as the large miners are mostly locked into long-term contracts.
On the data front today we will see the release of the latest monthly building approvals and the National Australia Bank (NAB) Business Confidence survey. On Tuesday we will see the release of monthly Retail Sales figures and the Westpac Consumer Sentiment survey. However all eyes will be on Tuesday night's Annual Budget Release which outlines the government's budget for the year, including expected spending and income levels, borrowing levels, financial objectives, and planned investments. On Thursday the Melbourne Institute will release the Consumer Inflation Expectations report which forecast the percentage that consumers expect the price of goods and services to change during the next 12 months.

Key Movers

The latest employment report in the US the Nonfarm Payrolls on Friday showed that hiring in April exceeded estimates as the economy added 253K. This reading came in better than the market expectation for an increase of 179,000 in the aftermath of the US Federal Reserve (Fed) 25 bps rate hike on Wednesday. Following the Fed’s decision, market participants quickly began to price in rate cuts. The US jobs report revealed that Average Hourly Earnings rose 0.5% MoM, exceeding 0.3% forecasts, while the Unemployment Rate edged down to 3.4% from 3.5% in March. Finally, the Labor Force Participation Rate remained unchanged at 62.6%, compared to the market expectation of 62.5%. Once the data is in the rearview mirror, investors expect the Fed to hold rates unchanged for June’s decision.

The Pound Sterling, meanwhile, continues to be underpinned by UK monetary policy divergence with the US based on much higher inflation in the UK. Not since 1977 have British households faced food prices rising at a faster pace, while the headline rate of inflation is stuck above 10% higher than in any other G7 nation. Despite this, economists predict headline inflation will fall rapidly when figures for April are published later this month. With all eyes now on next Thursday’s Bank of England (BoE) monetary policy meeting with many forecasting the central bank will raise interest rates for a 12th consecutive time on Thursday, with predictions for a quarter-point rise from the current level of 4.25%.

Expected Ranges

  • AUD/USD: 0.6650 - 0.6850 ▲
  • AUD/EUR: 0.6050 - 0.6250 ▲
  • GBP/AUD: 1.8585 - 1.8785 ▼
  • AUD/NZD: 1.0600 - 1.0800 ▲
  • AUD/CAD: 0.8900 - 0.9100 ▲