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Aussie buoyed on open as Chinese stimulus appears to take hold

AUD - Australian Dollar

The Australian dollar rallied into the close on Friday as risk appetite drove equities and commodity lead units higher. While broader moves remained muted the AUD bounced off intraday lows at 0.7065 to test and break above 0.71, with gains extended on open today. Stronger than anticipated Chinese PMI data released over the weekend has added to the general risk on mood after gains in both manufacturing and service sectors of the economy. Manufacturing rebounded through March, pushing beyond the delineation of expansion for the first time in five months, a sign stimulus measures may be helping to halt the broader economic slowdown. As such the AUD has rallied through 0.7125 on open, opening the door for a run on resistance at 0.7150.

Attentions now turn to additional Chinese Manufacturing data ahead of tomorrows all important RBA policy update. After last weeks RBNZ dovish surprise there is mounting pressure on the RBA to follow suit, stepping away from its neutral bias in a bid to stimulate flailing domestic economic performance. However, there is room for topside surprise as the RBA could easily dispel calls for a near term rate cuts, bolstering AUD demand, especially against key G10 crosses like NZD and EUR.

Key Movers

The pound pushed lower through trade on Friday, shifting below 1.30 after British lawmakers rejected PM May’s Brexit plan for a third time, pushing the UK closer to an unorderly exit and forcing the pound toward its biggest monthly loss since November. Having touched 1.2992 Sterling found support but struggled to extend even short-term upside into close as uncertainty and nervousness plague investors, hampering any real upward momentum. With so much unknown, traders are now sitting back, sidelining larger plays and perhaps exacerbating short term moves. We expect Sterling will continue to fluctuate within recent ranges ahead of larger re-positioning on definite Brexit strategy.

A slew of US data sets should support short term USD upside as the recent sell off and end to policy support gives way to stronger underlying macroeconomic fundamentals. Despite the Fed’s shift away from a message of patience US data sets remain ahead of the global curve and growth remains weak outside the US. Our attentions this week turn to Retail Sales, Core Durable Goods Orders, ADP employment change and Non-Farm Payroll data. Strength across the board could help strengthen the risk on trend with further direction stemming from US China Trade talks.

Expected Ranges

AUD/USD: 0.7060 - 0.7150 ▲

AUD/EUR: 0.6255 - 0.6355 ▲

GBP/AUD: 1.7950 - 1.8650 ▼

AUD/NZD: 1.0310 - 1.0510 ▲

AUD/CAD: 0.9420 -0.9520 ▼