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Global Market Update
The View from Australia

by Craig Killaby | May 9, 2021



> CN April Caixin Services PMI : 56.3 v. 54.2 exp.

> NZ Q2 Inflation Expectations : 2.05% v. 1.89% prev.

> EU March German Industrial Production : 2.5% v. 2.1% exp.

> CA April Employment Change & Unemployment Rate : -207.1K & 8.1% v. -160.5K & 7.8% exp.

> US April Non-Farm Employment Change & Unemployment Rate : 266K & 6.1% v. 990K & 5.8% exp.

> US April Average Hourly Earnings : 0.7% v. 0.0% exp.


Weekend Headlines (BBG)

> US employment missed expectations by a wide margin, sparking political debate as to whether or not fiscal stimulus is slowing down the labour market rebound

What you need to know

Interesting end to the week for financial markets, as the US employment figures sent shockwaves throughout markets as they missed expectations by a staggering margin. Prior to Friday overnight data the RBA’s SOMP did little to change the local currency as they believed that the AUD is well within fundamentals while reiterating no rate hikes for three years. Sideways trading was seen below the 0.7800 handle, as the currency traded in its multi week range ahead of employment figures from the US and Canada overnight. Canada’s lockdowns and poor vaccine rollout is plaguing the labour markets, with over 200K jobs lost in the month of April with widespread lockdowns seen while the unemployment rate ticked up back above 8%.


The real focus was on the US, with investors positioned for a strong report that was meant to show the quick rebound that the vaccinations are having on the US economy, with nearly 1mio jobs expected to be added in April. That was not to be, with 266K jobs added the official figure while the unemployment rate ticked up back over 6%. The rebound is not happening as quickly as hoped, with the back to work moves not having the desired impact on the labour market as yet. The Dollar was smashed on the release, with the DXY down 0.7% while UST yields slid. The Dollar had its worst session since September, with nearly every major up sharply against the Greenback. The AUDUSD hit a high of 0.7862 in the aftermath, and only a few ticks off as I write this morning. US equity markets surprisingly were able to gain with the S&P500 up 0.75% despite the jobs miss. While the story in commodity markets continues to be the staggering moves in metals with Iron Ore up well over US$200/tonne, and Copper surging yet again up 3%.


The Day Ahead




> AU March Retail Sales : 1.4% exp.

> AU April NAB Business Confidence : 15 prev.

> US FOMC Member Evans to speak


With the range broken Friday this will be an interesting week for the AUDUSD, back up towards 0.7900 the focus will be on commentary from the US Fed with the local data docket very light. Also hitting the wires tomorrow night will be the AU budget, and with the government pledging to spend until the employment recovery is complete, expecting it to be AUD supportive. Commodity markets are back in the limelight, and as they continue to surge inflation worries are likely to take centre stage. The weaker Dollar theme that ended last week seems to have carried through, with the chance of a break higher towards 0.7900 a real chance.


Range for the day : 0.7840 – 0.7915


AUD/USD Technicals


Finally a break, and it came to the upside as the Buck selloff the catalyst. With the pair opening up testing the intraday high from Friday at 0.7862, the likelihood of a move towards 0.7900 is strong today. Profit taking may see a drift back towards 0.7835, with 0.7795 the target on moves lower.

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