- The Australian dollar remains under pressure, falling to the lowest level in four months against the greenback on Thursday.
- Currency Strategists at the Commonwealth Bank say the prospect of RBA rate cuts will likely see the AUD/USD spend “more time below 0.7000 in the near term”.
- US Q1 GDP is the headline data release on Friday. There’s also a lot of data on the way from Australia and Japan, although it’s not likely to have much of an impact on currency markets.
The Australian dollar remains under pressure, briefly falling below the 70 cent level against the greenback on Thursday, leaving it at a four-month low.
Here’s the scoreboard at 7am in Sydney on Friday.
AUD/USD 0.7015 , 0 , 0.00%
AUD/JPY 78.29 , -0.40 , -0.51%
AUD/CNH 4.7348 , 0.0108 , 0.23%
AUD/EUR 0.6299 , 0.0011 , 0.17%
AUD/GBP 0.5440 , 0.0004 , 0.07%
AUD/NZD 1.0585 , -0.0052 , -0.49%
AUD/CAD 0.9459 , -0.0004 , -0.04%
Having tumbled on Wednesday following the release of a weak Australian inflation report that increased speculation over the prospects of a near-term RBA interest rate cut, the AUD/USD continued to slide on Thursday, briefly falling below the .7000 level for the first time since early January this year.
After lifting earlier in the week, the main story on Thursday was modest US dollar strength with the dollar index lifting to the highest level since May 2017, largely reflecting divergent monetary policy and economic outlooks between the United States and other major developed nations.
However, after trading down to as low as .6988, the AUD/USD found renewed buying support towards the close, helping it to reclaim all of its earlier losses.
“Bearish sentiment continues to grip the AUD after a weak inflation print firmed the case for a May rate cut,” said analysts at ANZ Bank.
“The Aussie dipped below the key psychological level of 70 US cents… as risk appetite dissipated but rebounded to close above key support.”
Despite the late rebound during the session, Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank, said the Aussie dollar is likely to remain pressured given widespread expectations that the RBA will cut Australia’s cash rate again.
“The interbank futures market is pricing two rate cuts by the RBA by the end of 2019,” he said in a note released on Friday. “While financial markets are pricing a RBA rate cut cycle, we expect AUD/USD to stay heavy and spend more time below 0.7000 in the near term.”
Turning to the day ahead, it promises to be another quiet Asian session despite the release of a swathe of Australian and Japanese economic data.
Locally, trade prices and producer price inflation figures for the March quarter will be released at 11.30am AEDT.
The Japanese calendar is even busier with unemployment, industrial production, retail sales and Tokyo inflation figures all released during the session. New Zealand trade data for March will also arrive in early Asian trade.
Despite the busy calendar, whether traders will pay any attention to it remains debatable. Based on recent history, there’ll be minimum market reaction, especially to the Japanese data.
As is often the case, the big market-moving events will arrive in the second half of the session with US Q1 GDP the undisputed headline act.
The median economist forecast looks for a seasonally adjusted annualised growth rate of 2.3%, up from 2.2% in the final quarter of last year.
While the preliminary GDP estimate is often subject to significant revisions given it is based on incomplete data and assumptions, this release carries the greatest potential to generate short-term volatility during Friday’s trading session.
Aside from the GDP report there’s little first-tier data to speak of, placing greater emphasis on this figure along with headlines seen during the session.
“An upward surprise in US Q1 GDP could push AUD below 0.7000 again,” Capurso said.
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