- The AUD/USD suffered from the strength of the US Dollar and was not helped by local data.
- A busy week with the RBA meeting, Retail Sales, and Chinese PMIs awaits.
- The technical picture shows somewhat oversold conditions after the sharp fall.
Higher US yields, mediocre Australian inflation
US 10-year bond yields broke above the closely-watched level of 3% and reached the highest level since 2011. The advance of US yields buoyed the US Dollar across the board, and the AUD/USD suffered. Also, US GDP came out slightly above expectations at 2.3% annualized for Q1, also providing support for the greenback.
In Australia, the quarterly inflation report came out slightly below expectations with 0.4% QoQ on the headline against 0.5% expected. The Trimmed Mean figure met expectations at 0.5% QoQ. Other Australian inflation data was better: PPI came out at 0.5% QoQ against 0.4% expected while Import Prices came out at 2.1% instead of 1.3% projected. Nevertheless, the most critical data point was the CPI figure, and it was not helpful.
The Summit in Korea cheered markets and helped stabilize the Australian Dollar after the falls.
Australian events: RBA and lots more
The upcoming week is much busier. Early on Monday, China releases its official purchasing managers’ indices. The Manufacturing PMI is expected to tick down to 51.3, and that may weigh on the Aussie. The Governor of the Reserve Bank of Australia Phillip Lowe will speak before the rate decision and given this timing; he may refrain from addressing monetary policy.
The rate decision on Tuesday is expected to be yet another “unchanged.†The RBA has not changed its rates since 2016 and also indicated stability moving forward. It will be interesting to hear if they are more pleased with the fall of the A$ and conversely if they are worried about the drop in consumer inflation.
Wednesday sees the release of the more significant Chinese data: the independent Caixin Manufacturing PMI. Also here, a drop is on the cards: to 50.8 in April after 51 beforehand.
