The Australian dollar is grinding higher as traders ready for a big day ahead

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  • The Australian dollar ground higher on Thursday amidst choppy trade.
  • The AUD/USD was supported by stronger-than-expected Australian economic data and US dollar weakness.
  • Highlights today include the RBA’s SoMP and US non-farm payrolls for April.

The Australian dollar pushed higher amidst choppy trade on Thursday, helped by stronger-than-expected Australian economic data and profit-taking in the US dollar ahead of Friday’s US jobs report.

Here’s the scoreboard as at 7am AEST.

AUD/USD 0.7530 , 0.0036 , 0.48%
AUD/JPY 82.21 , -0.06 , -0.07%
AUD/CNH 4.7763 , 0.0018 , 0.04%
AUD/EUR 0.6280 , 0.0013 , 0.21%
AUD/GBP 0.5546 , 0.0031 , 0.56%
AUD/NZD 1.0690 , -0.0014 , -0.13%
AUD/CAD 0.9669 , 0.002 , 0.21%

After opening the session just below the 75 cent level, the AUD/USD began to push higher as Asian markets opened, helped by the release of stronger-than-expected trade and building approvals figures from Australia.

Profit-taking in the US dollar ahead of Friday’s US non-farm payrolls report also helped to underpin the Aussie.

In the second half of the session, the movements in the AUD/USD largely reflected those in US stocks, initially falling back towards session lows before recovering as initial weakness in stocks was reversed.

There was little reaction to US economic data released during the session with better-than-expected trade and factory order data offset by disappointing non-manufacturing PMI and labour costs reads.

In the wash-up, the AUD/USD is currently trading comfortably above the 75 cent level at .7530.

AUD/USD 5-Minute Chart

Whether the Aussie remains there today will likely be determined by two events in particular.

The first, updated economic forecasts from the Reserve Bank of Australia (RBA) at 11.30am AEST. The second, April’s non-farm payrolls report at 10.30pm AEST.

There’s already been the post-board statement and the relaxed Lowe speech so the initial focus might well centre on the inflation forecasts and any tweaking thereof,” said David de Garis, Economist at the National Australia Bank (NAB), in relation to the RBA’s quarterly statement on monetary policy (SoMP).

“Underlying inflation for June and December 2018 might be lifted by 0.25% to 2%, but will 2019 and 2020 change? Unlikely, given Lowe’s comments [earlier this week] of Q1 CPI being in line with their forecasts.”

Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank, doesn’t expect that there’ll be much of a reaction to the RBA release.

“We do not expect much market reaction from the SoMP because RBA Lowe delivered a speech earlier in the week outlining his views on the economy and monetary policy,” he says.

As for the US payrolls report released later in the session, Capurso isn’t expecting any major surprises.

“We expect payrolls to expand by 200,000 after the small increase in March,” he says. “We expect the unemployment rate to return to 4.0% and average earnings to expand by 0.2% to 2.7% per annum.”

It’s the latter that financial markets will be watching the closest today given the implications for domestic inflationary pressures.

Markets expect the annual rate to hold steady at 2.7%. Elsewhere, unemployment is seen falling to 4% while payrolls are forecast to lift by 192,000 following a 102,000 increase in March.

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