> AU March Trade Balance : 5.57Bio v. 8.25Bio exp.
> AU RBA Rate Statement & Decision : 0.10% v. 0.10% exp. (no change)
> UK April Final Manufacturing PMI : 60.9 v. 60.7 exp.
> CA March Trade Balance : -1.1Bio v. 0.5Bio exp.
> US March Trade Balance : -74.4Bio v. -74.5Bio exp.
Overnight Headlines (BBG)
> US Treasury Secretary Yellen commented on a potential rise in interest rates to prevent an overheating of the economy, although a timeframe was not specified
What you need to know
There was finally some movement across FX markets overnight, with comments from US Treasury Secretary Janet Yellen on potential rate rises and inflationary pressures igniting a bout a risk aversion. Yesterday’s Asian session was still plagued by the Japanese and Chinese holidays, while the onshore data showed imports dropping significantly in the month of March. The AU trade surplus shrank to below 6Bio, seeing a slow drift lower in the AUDUSD shortly thereafter. The RBA kept policy unchanged, while also kicking the can down the road until the July meeting to make a decision on the yield curve target. It is quite clear that the RBA wants to see more data before policy is tweaked, with the AUDUSD spiking in the aftermath and drifting lower into the London open.
The main price action overnight was dictated by inflation fears as supply bottlenecks and commentary drove the move away from risk assets. The AUD performed poorly, down 0.7% at the time of writing and touching an intraday low of 0.7675 overnight. The Yellen commentary spooked investors, although she later clarified that she was neither recommending or predicting a rate hike, US equity markets had a tough session with the S&P500 down 0.7%. The Dollar is up 0.3% in DXY terms, a result of haven buying as UST yields slid on the risk-off sentiment. There seems to be no stopping commodities, with WTI crude up 2.6% while both Iron Ore and Copper edging out gains. Next up for the space is the US multi-trillion Dollar infrastructure plan as the Biden administration attempts to pass it through Congress.
The Day Ahead
> NZ Q1 Employment Change & Unemployment Rate : 0.3% & 4.9% exp.
> AU March Building Approvals : 2.9% exp.
> EU April Final Services PMI : 50.3 exp.
> EU Economic Forecasts
> US April ADP Non-Farm Employment Change : 872K exp.
> US April ISM Services PMI : 64.2 exp.
> US FOMC Member Evans to speak
> US EIA Crude Oil Inventories : -1.9Mio exp.
NZ employment figures for Q1 this morning will be the APAC data highlight, while local building approvals provides some tier two data in Australia. The commentary from Janet Yellen will likely reverberate across the local session, as inflation fears start to slowly perk back up with equities the biggest causality on the price increase fears. Expecting a soft session for risk sentiment, with the poor lead in from Wall Street likely to see local markets open in the red as the rotation away from growth ramps up again.
Range for the day : 0.7660 – 0.7730
The pair seems to be at a crossroads with the 100/50DMA converging at the 0.7708 level this morning. The bearish momentum is starting to build, with equity markets the clear barometer the chances of a break back towards the intraday low of 0.7675 today cant be ruled out.
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