Sentiment soured as strong US economic data hinted at inflationary pressures and a Fed hawk spoke. The S&P500 closed down 0.8%, the US dollar rose, and bond yields fell slightly. Brent crude oil futures fell 1.8% to $66.75, copper fell 0.3%, and gold fell 0.2%, while iron ore fell 2.1% to $187.20.
Overnight Currency Ranges
AUD/USD 0.7696 0.7784
EUR/USD 1.2016 1.2126
GBP/USD 1.3803 1.3958
USD/JPY 108.71 109.34
NZD/USD 0.7151 0.7254
USD/CAD 1.2266 1.2322
USD/CNH 6.4610 6.4751
AUD/JPY 84.15 84.85
AUD/NZD 1.0723 1.0769
AUD/USD picks up bids around 0.7720, struggles to recover from short-term range support, the Aussie pair marked the biggest monthly gain in 2021, despite the recent pullback, in April. The downward pressure remains present at the start of May even as buyers defend 0.7700.
Fears of delayed economic recovery from the coronavirus (COVID-19) and doubts over the US fiscal relief packages seemed to weigh on the market sentiment of late. Chatters surrounding “the one-jab isn’t enough to tame the covid” and worsening virus conditions in Asia backed the latest risk-aversion wave. Also on the negative side could be the US Republicans’ firm rejection to support President Joe Biden’s stimulus amid tax hike concerns. On the contrary, US Treasury Secretary Janet Yellen recently said, during an NBC interview, “it would be ‘safest’ to include the means for President Biden's infrastructure plan to fund itself.”
Elsewhere, mixed activity numbers from China, Australia’s largest customer, as well as downbeat equities and stronger US dollar also dragged AUD/USD prices on Friday. It's worth mentioning that faster vaccinations in the West and recently upbeat figures from most part of the globe keep traders hopeful.
Looking forward, AiG Performance of Manufacturing Index and Commonwealth Bank Manufacturing PMI will precede TD Securities Inflation for April to direct immediate AUD/USD moves. However, covid updates and other risk catalysts keep the driver’s seat. It should, however, be noted that a day off in Japan and China will restrict the quote’s performance in Asia.
The broad based USD strength saw the AUD/USD reach 0.7696 on Friday. Demand is expected ahead of 0.7660 while offering interest remains thin until we reach a 0.7800 handle.
Event Risk Data Today
Australia: The April CoreLogic home value index looks set for another strong read, albeit not quite in the same league as March. The CoreLogic daily index points to a 1.8% rise nationally, Sydney again outperforming with a 2.4% rise. The strength of gains in early 2021 has led us to upgrade our full year price growth forecast from 10% to 15% although the pace will likely slow from here, initially as the surge starts to see more prospective owner occupiers 'priced out' in terms of affordability. The April MI inflation gauge will provide an early measure of price pressures following a soft Q1 CPI print. April ANZ job ads have been forging ahead in recent months, with similar strength seen in the ABS’ official measure of vacancies.
Asia: April Nikkei manufacturing PMIs will be published for South Korea, Taiwan, Malaysia, Indonesia and India.
US: March constructing spending should lift 1.8%; strength will likely be concentrated in residential. April ISM manufacturing will be released, with conditions currently sitting at a 35-year high. Finally, Fed Chair Powell will speak on community development.