The US Dollar retained its strength, reaching fresh weekly highs against most major rivals. However, demand for the greenback lost momentum after the release of encouraging US related data. Unemployment claims decreased to 439K in the first week of May, its lowest reading since March 2020. Commodities, Brent crude oil futures fell 3.4% to $67.00, copper fell 0.9%, and gold rose 0.6%, while iron ore fell 6.9% to $217.65 amid efforts by China to dampen prices. US Treasury yields retreated, with the yield on the 10-year note hitting 1.70% to then settle at 1.66%. Stocks bounced back, with US indexes closing with substantial gains and trimming most of Wednesday’s losses.
However, producer prices in the US rose by more than anticipated, another sign of heating inflation. All eyes now turn to US Retail Sales, seen contracting by 0.2% MoM in April.
Overnight Currency Ranges
AUD/USD 0.7688 0.7746
EUR/USD 1.2051 1.2106
GBP/USD 1.4008 1.4076
USD/JPY 109.41 109.78
NZD/USD 0.7135 0.7193
USD/CAD 1.2104 1.2203
USD/CNH 6.4448 6.4595
AUD/JPY 84.31 84.83
AUD/NZD 1.0754 1.0793
The transitory inflation spike still dominating investor thinking with supply chain issues and base effects also in play in the PPI data released overnight. Ahead today we have US Retail Sales and Industrial Production for April which could also suffer from pent up demand and component shortages - both data sets are forecast to expand over 1% mth/mth.
With multiple lows in the 0.7680/0.7700 area (both overnight and over recent weeks), look for further support for AUD/USD in that zone in the sessions ahead. Offers from 0.7750/70 and then again nearer 0.7820.
Event Risk Data Today
New Zealand: The April manufacturing PMI is likely to follow the global trend of robust manufacturing.
US: The headline April import price index will be supported by rising fuel costs and supply chain issues (market f/c: 0.6%). April retail sales have been surging on the reopening, the labour market recovery, and the stimulus (market f/c: 1.0%). Likewise, April industrial production is expected to advance 1.0%, with the manufacturing surveys reporting strong growth in output and new orders. Business inventories are likely to remain choppy throughout the year due to restocking and elevated turnover, and should rise 0.3% in March. May University of Michigan consumer sentiment is still below pre-COVID levels, but is beginning to accelerate (market f/c: 90.2). Finally, the FOMC’s Kaplan will take part in a moderated virtual discussion hosted by the University of Texas.