After sliding 3.13% last week, the largest percentage decline registered since early January this year, the Australian dollar has continued to push lower in early Asian trade on Monday, holding just above .7350 against the US dollar.
Ray Attrill, co-head of FX strategy at the NAB, puts the continued weakness down to heightened expectations that the Reserve Bank of Australia will continue to cut interest rates in the months ahead along with the release of disappointing Chinese trade figures for April released over the weekend.
“Markets have been quick to price in a high probability of another quarter point cut to the cash rate to 1.5% by August, closing Friday ascribing about one-third odds on a move as early as June and a roughly 50% chance of a cutting to 1.25% later in the year,” he wrote in his morning note.
“The AUD has opened a little weaker again this morning, though not as much as the Canadian dollar where the Alberta wildfires are reported to have doubled in size over the weekend. AUD slippage follows the release Sunday of China’s April trade figures. These showed a larger than expected surplus at $45.6 billion, above the $40 billion expected but driven largely by deterioration in import growth.”
Imports fell by 10.9% in US dollar terms compared to a year earlier, below the 5% contraction expected. Exports also declined after posting a surprise rebound in March, falling 1.8% compared to forecasts for a drop of just 0.1%.
After the wave of market-moving data released last week — both domestically and internationally — Attrill notes the data calendar this week is “much less hectic”.
“After the deluge of marquee events in the past week and a half, the schedule is a much less hectic with second-tier data only,” he says.
“Of these, housing finance and monthly consumer confidence Wednesday are the most noteworthy. Also likely to garner some attention is consumer inflation expectations Thursday. Other data out includes the regular weekly consumer confidence measure Tuesday and ANZ job ads on Monday.”
Like the domestic calendar, Attrill notes that there are no major data releases or events scheduled that have the potential to move markets one way or another.
After last week, you can hear the collective sigh of relief resonating across financial markets this morning.
Here’s the current Australian dollar scoreboard.
- AUD/USD 0.7359 , -0.0005 , -0.07%
- AUD/JPY 78.92 , 0.02 , 0.03%
- AUD/CNH 4.7938 , -0.0046 , -0.10%
- AUD/EUR 0.6455 , -0.0004 , -0.06%
- AUD/GBP 0.5100 , -0.0003 , -0.06%
- AUD/NZD 1.0771 , -0.002 , -0.19%