AUD finds momentum on new demand for risk.
Thursday 27 May, 2021
Daily Currency UpdateThe Australian dollar fell on Friday, following the price of commodities as Iron Ore dropped 1.1% on the day. Declining 0.6%, the local currency closed the week flirting with May’s support levels of 0.7725 despite Preliminary Retail Sales beating forecasts on a seasonally adjusted basis of 1.1% for April. Markets were disappointed on the drop from last month’s reading of 1.3%, sending the AUD 20 points lower during the domestic session to 0.7754.
Despite not having a material impact on the Aussie, both Flash Manufacturing and Services PMI remained strong in May, citing improved confidence levels from easing Covid-19 restrictions.
The Australian dollar opens at 0.7725. We expect support levels to hold onto moves approaching the 77 US cents handle, while any upward push will likely meet resistance at 0.7780.
Key MoversU.S. 10-year Treasury yields were basically unchanged on Friday moving to 1.63%. The US Dollar Index (DXY) was a solid mover higher by 0.3%, closing at 90.03 following an intraday day high of 90.15. The greenback was supported by the positive release of Manufacturing and Services PMI, both beating expectations for the month. Private sector firms noted strong expansion in business activity, fueling an increase in inflation as the average price of goods and services rapidly increase.
A raft of Flash Manufacturing and Services PMI were also released in Europe, where the region has also experienced a surge in demand for goods and services, growing at its fastest pace in three years. Concerns globally regarding a surge in inflation were dismissed by the European Central Bank President Christine Lagarde, noting it was a temporary shift higher following the fewer constraints due to Covid-19. Despite the strong release, EUR/USD finished 0.38% lower (1.2180) and the GBP/USD also declined 0.34% to 1.4140 due to greenback strength.
The week ahead opens with several public holidays in Europe (Germany, France, Switzerland). The main central bank action occurs in New Zealand where the RBNZ meets on Wednesday for their official cash rate decision. In the United States, investors focus their attention to GDP results for the quarter and weekly unemployment claims.
- AUD/USD: 0.7700 - 0.7780 ▼
- GBP/AUD: 1.8200 - 1.8480 ▲
- AUD/NZD: 1.0720 - 1.0800 ▼
- AUD/EUR: 0.6320 - 0.6370 ▼
- AUD/CAD: 0.9280 - 0.9350 ▼