The dollar gave back the ground gained post-FOMC Minutes, ending Thursday down against all of its major rivals. Government bond yields retreated as investors digested the latest Federal Reserve’s announcement. The yield on the benchmark 10-year Treasury note dropped to 1.627% after flirting with the 1.70% threshold on Wednesday.
Global equities recovered, with all European and American indexes closing in the green and weighing on the greenback. US techs led the recovery in the US, following an encouraging employment-related report, which showed that unemployment claims continued to shrank. Commodities, Brent crude oil futures fell 2.0% to $65.22, copper fell 0.2%, and gold rose 0.5%, while iron ore fell 2.6% to $207.95.
Overnight Currency Ranges
AUD/USD 0.7715 0.7781
EUR/USD 1.2169 1.2228
GBP/USD 1.4103 1.4192
USD/JPY 108.75 109.30
NZD/USD 0.7159 0.7217
USD/CAD 1.2048 1.2144
USD/CNH 6.4313 6.4424
AUD/JPY 84.27 84.64
AUD/NZD 1.0770 1.0799
AUD/USD edges higher around 0.7775, keeping the previous day’s recovery moves, during early Friday morning in Asia. The Aussie pair reversed most of the week’s losses on Thursday as risk-on mood favoured the bulls. Though, nearness to the key Aussie data and a light calendar probe the bulls of late.
Following the US FOMC Minutes-led risk aversion wave, which propelled the US dollar and weighed on Antipodeans, market sentiment recovered on Thursday. While the Fedspeak keeps shrugging off the reflation fears and need for tapering, higher than expected drop in the US Weekly Jobless Claims, from 450K to 444K, taking down the 4-week Average to 504.75K versus 535.25K prior, recalled the bulls.
At home, the Aussie jobs report again proves the RBA’s cautious employment forecasts right while inflation expectations improved for May. Also on the positive side could be the hopes that geopolitical tension in Gaza will soon recede while nuclear talks with Iran aren’t dumped like always.
Additionally contributing to the risk-on mood could be the jump in the cryptocurrencies, mostly reversing Wednesday’s heavy draw, amid comments from Elon Musk and other price-positive factors. It should, however, be noted that Thursday’s market moves could best be described as consolidation than the bull’s power-play as traders keep struggling for clear direction over the Fed’s next moves. Amid these plays, Wall Street benchmarks buck a three-day losing streak, led by Nasdaq, while the US 10-year Treasury yield drops 5.5 basis points (bps) to 1.628% by the press time.
Moving on, preliminary readings of Australia’s Retail Sales for April and the US activity numbers for May will be crucial to watch as traders seek more clues to justify economic recovery hopes. Given the likely weakness in the Aussie Retail Sales, from 1.3% to 0.5% YoY, as well as downbeat forecasts for US Markit PMIs, AUD/USD may battle the near-term important hurdle. Though, trade tussles with China and geopolitical fears, not to forget doubts over the Fed’s next move, can keep the bulls chained.
The AUD/USD traded in 0.7715/.77815 range yesterday and all key technical levels remain intact. Topside resistance remains at 0.7815/20 while demand should emerge as we approach 0.7700.
Event Risk Data Today
Australia: On balance markets expect April preliminary retail sales to be up 0.8%, with annual growth set to spike to an extraordinary 24%yr on base effects from last year's lockdown. Consumer sentiment hit an 11yr high in April as the further relaxation of COVID restrictions and a strong housing upturn more than offset concerns about the expiring JobKeeper scheme and setbacks to vaccine rollouts. However, this may not see much of a boost to retail as reopening rebounds are driving a big switch back into spending to service sectors, outside the scope of the retail survey.
Europe: May Markit manufacturing and services PMIs are due for the Euro Area and the UK.
Euro Area: May consumer confidence will find support in the improvement of the vaccine rollout (market f/c: -6.5).
UK: Ahead of the May release, GfK consumer sentiment has been approaching pre-pandemic levels and will continue to rise as restrictions relax (market f/c: -12). April retail sales are expected to rise 4.5% and will continue to strengthen as we move into H2.
US: May Markit manufacturing (market f/c: 60.1) and services PMIs (market f/c: 64.4) are due, and will both be spurred by the reopening, stimulus and buoyant consumer spending. Existing home sales are set to rise 0.8% in April; in recent months, elevated prices and a lack of supply have constrained turnover.