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Global Market Update
The View from Australia

by Craig Killaby | May 13, 2021

Data/Speakers

 

> NZ April Food Price Index : 1.1% v. 0.0% prev.

> JP March Current Account : 1.70T v. 1.87T exp.

> US Unemployment Claims : 473K v. 487K exp.

> US April H/Line PPI & Core PPI : 0.6% & 0.7% v. 0.3% & 0.4% exp.

 

Overnight Headlines (BBG)

> US President Biden has told GOP lawmakers that he is open to compromising on his massive infrastructure plan as the US economy continues to reopen

What you need to know

As has become the norm, a large selloff has been accompanied by a buying opportunity as US equity rebounded on positive data and chose to ignore potential inflation risks. The AUDUSD traded lower throughout the session, touching a fresh low of 0.7688 before rebounding and opening this morning largely unchanged on the day. The crosses are mixed, with AUDNZD the biggest loser as the NZD outperformed on some optimistic tones coming from NZ Pm Ardern’s speech yesterday. The Dollar is down marginally in DXY terms, with the move lower in UST yields a factor in the move.

 

The data from the US overnight showed that the reopening of the economy is moving in the right track, with unemployment claims lower than street estimates. However, inflationary themes continue to mount with McDonalds announcing they will be raising their base wages in an attempt to bring Americans back to work as wages start to creep higher. Producer prices from the US also rose more than expected, with both the core and headline numbers exceeding the market estimates. Market reaction relatively muted in FX, however commodities bore the brunt of the selloff overnight with WTI crude, Copper and Iron Ore all taking big losses. Gold the outlier, as the commodity starts to regain some of its lustre up 0.6% while Bitcoin took a nosedive as Elon Musk’s comments on Bitcoin hurt the entire cryptocurrency market.

 

The Day Ahead

 

Data

 

> NZ April Business NZ Manufacturing Index : 63.6 prev.

> EU ECB Monetary Policy Meeting Accounts

> CA March Manufacturing Sales : 3.5% exp.

> US April Retail Sales & Core Retail Sales : 1.0% & 0.5% exp.

> US April Industrial Production : 0.9% exp.

> US May Prelim UoM Consumer Sentiment : 90.2 exp.

> US May Prelim UoM Inflation Expectations : 3.4% prev.

 

Likely to be a quiet session locally, with no data on the docket investors eyes will start to peer ahead to the very key AU employment report next Thursday as the next major risk. US data will be highlighted by the retail sales numbers for April, expected to be strong as the vaccination effort in the US builds even more momentum and the reopening continues. ECB accounts may show what members think about the potential rising inflationary pressures, due to be released tonight. Expecting tight range today above 0.7700, with equity futures driving sentiment.

 

Range for the day : 0.7685 -0.7760

 

AUD/USD Technicals

 

Fresh lows of 0.7688 gives us another target on a risk-off selloff, with the weekly close very important as the pair hovers around the 50/100DMAs. The bullish momentum seems to be slowed for now, with the inflation risks limiting the upside potential for the pair. Sliding commodities will dampen the mood, with 0.7760 still the key level for now.

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