The Australian dollar drifts higher as the economic calendar begins to ramp up

Rahman Roslan / Getty Images.
  • The Australian dollar drifted higher to start the week, gaining ground in Asia as the greenback remained under pressure.
  • Chinese PMI data for April will be released today. It’s likely to be the highlight of the Asian session.
  • Australian private sector credit growth and New Zealand business confidence will also be released with both carrying potential implications for moenatry policy settings from the RBA and RBNZ.
  • Eurozone Q1 economic growth and inflation data from Germany and France will be the main economic highlights in the second half of the session.

The Australian dollar drifted higher to start the week, gaining ground in Asia as the greenback remained pressured by growing rate cut expectations from the Fed.

Here’s the scoreboard at 7am in Sydney on Tuesday.

AUD/USD 0.7056 , 0.0017 , 0.24%
AUD/JPY 78.77 , 0.28 , 0.36%
AUD/CNH 4.7545 , 0.0124 , 0.26%
AUD/EUR 0.6307 , -0.0002 , -0.03%
AUD/GBP 0.5456 , 0.0013 , 0.24%
AUD/NZD 1.0579 , 0.0016 , 0.15%
AUD/CAD 0.9493 , 0.0025 , 0.26%

The Aussie rose throughout Asian trade, lifting back towards the highs struck late last week. However, after hitting .7060 late in the Asian session, the Aussie’s move stalled, seeing it flat-line throughout European and North American trade.

In data released during the session, US personal consumption beat market expectations for March. However, growth in personal incomes undershot at 0.1% during the month. Underlying inflation pressures also fell short of forecasts, keeping the greenback under modest pressure as Fed rate cut expectations continued to build.

“Inflation data were softer for March, with the core PCE deflator flat in the month and up 1.6% year-on-year, the lowest rate in over a year,” said David de Garis, Economist at the National Australia Bank.

“On a six monthly annualised basis, the core PCE deflator was down to 1.38%, the lowest since mid-2017.”

Markets had been expecting core PCE to lift by 1.7% from a year earlier.

While US bond yields lifted modestly during the session, largely as a result of increased issuance from the US Treasury, that was not enough to support the US dollar index which continued to ease lower after hitting a near two-year high last week.

Investing.comAUD/USD Hourly Chart

Helping to drive the greenback lower, the euro strengthened on Monday despite the release of data showing Eurozone economic confidence fell to the lowest level in over two years in April.

That saw the Aussie finish marginally lower against the euro. However, it managed to climb against all of the other major crosses on Monday.

Turning to the session ahead, PMI data our of China looks set to dictate the Aussie’s short-term direction, particularly the manufacturing index which is expected to hold at 50.5 in April, unchanged from a month earlier.

“The AUD/USD will take some guidance from today’s April China manufacturing PMI,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.

“The PMI bounced in March and generated positive sentiment for market participants about a potential pick up in the global economy.

“Market participants will want to know if the China PMI March bounce was a blip or the start of a stronger growth uptrend reflecting the Chinese government’s fiscal stimulus.”

The manufacturing PMI, along with figures from China’s non-manufacturing and steel sectors, will be released at 11am AEST. The separate Caixin-IHS Markit China manufacturing PMI will also arrive at 11.45am AEST.

Outside of the China data, there’ll also be some interest on Australian private sector credit growth data for March that will be released at 11.30am AEDT.

In particular, traders will be watching for any signs of a rebound in housing credit growth given the implications for home prices, and potentially monetary policy settings from the RBA.

In New Zealand, the release of the NBNZ business confidence survey for April will also garner plenty of interest given the Reserve Bank of New Zealand has cited weak confidence levels as one factor that could warrant renewed monetary policy easing. It will be released at the same time as the Chinese PMIs at 11am AEST.

Later in the session, the main data highlights include the first estimate of Eurozone Q1 GDP, German and French inflation for April along with employee costs, Chicago PMI and pending home sales in the United States.

Japanese markets will remain closed for Golden Week holidays. Chinese markets will also close from Wednesday for Labour Day holidays. The US Federal Reserve’s two-day monetary policy meeting will also get underway.

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