AUD upswing fails again in face of weaker China data
Written by
Daily Currency Update
The Australian dollar tracked lower Tuesday yet remains well and truly entrenched within a familiar range. Having tested resistance at US$0.65 the AUD slid back below US$0.6450 after weaker than expected China manufacturing data. The Caixin PMI report fell to its lowest level since September 2022 dampening demand for the AUD as hostilities between the US and China appear to be rising again. After a period of de-escalation through May tensions have risen this week with both sides claiming a breach in the terms of the agreement that allowed the 90-day reprieve on punishing tariffs. While no new headline newsflow emerged the US has reminded trading partners the deadline in tariff negotiations is fast approaching. Extended policy uncertainty and a softer growth outlook continue to weigh on the AUD and ensure it remains firmly stuck between US$0.64 and US$0.65.Our attention today turns to domestic GDP data for Q1. We expect a weaker growth reading led by a softening in consumer demand. Offshore, US ADP payroll numbers will afford us some insight into Friday’s broader Nonfarm payroll print while a Bank of Canada policy meeting headlines the macroeconomic ticket.
Key Movers
The US dollar has recovered some of the week's earlier losses and has been one of the stronger performing majors through the last 24 hours. Price action across currencies was muted through trade on Tuesday with markets ignoring an OECD report that revised down global growth forecast, amid substantial barriers to trade and growing policy uncertainty. Instead, markets looked to US Jolts jobs data. The April report showed a rise in job opportunities well beyond market expectations suggesting the labour market has retained its resilience despite broader policy uncertainties. While subindices with the report suggest a growing instability the data still supported an upward move for US treasuries and the dollar. The euro fell back below 1.14 settling near 1.1370 after euro area CPI inflation data printed lower than expected, elevating calls for the ECB to lower rates for an 8th time when it meets Thursday. The GBP is weaker too while the USD pushed back above 144 against the yen.Our attentions now turn to US ADP private payroll data as a key marker ahead of Friday’s non-farm payroll numbers, while ISM services data and the Fed’s beige book offer further insights into the impacts of tariffs and Trump policy. Outside the US the Bank of Canada meets, we expect rates will be unchanged, yet some analysts are calling for a 25-point cut.
Expected Ranges
- AUD/USD: 0.6400 - 0.6530 ▼
- AUD/EUR: 0.5600 - 0.5700 ▲
- GBP/AUD: 2.0700 - 2.1000 ▲
- AUD/NZD: 1.0720 - 1.0820 ▲
- AUD/CAD: 0.8820 - 0.8920 ▼