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US Dollar Weakness Lifted The Aussie Before A Massive Week Of Data

Published 05/06/2017, 11:55 am
Updated 06/07/2021, 05:05 pm

Originally published by AxiTrader

The Australian dollar is higher this morning after the poor result of just 138,000 jobs for US non-farm payrolls Friday undermined the US dollar. That print was below the bottom end of expectations and

That print was below the bottom end of expectations and came with an associated reduction of 66,000 jobs for the previous two months. With the associated weakness in recent US data prints - which has seen the Citibank economic surprise index fall to -40.9 - should be enough to give the Fed reason to pause at next week's FOMC meeting.

That pause would be reasonable and could give the US central bank an opportunity to assess whether the recent run of weak data is indeed transitory or whether it is something more serious.

Currently Fed Fund markets haven't priced such an eventuality with the CME FedWatch tool ending Friday with a 94% probability of a rate hike next week. But currency and bond traders have taken a different view with 10's and the US Dollar Index both falling to their lowest levels in 2017.

That US dollar weakness has thrown a lifeline to the Australian dollar which was slipping under the weight of its various deficiencies.

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Indeed one of my favorite indicators for the Aussie - the relative performance of the MSCI global metals index versus the overall MSCI world index - has remained under pressure recently as tech stocks lead the global stock market rally.

It suggests investors eyes are elsewhere than on the Australian Dollar (USD) at present.

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But that doesn't mean a weaker US dollar can't lift the Aussie higher should the current weakness persist. Looking at the technicals a move up through 0.7450/60 opens the way for a run toward recent highs at 0.7515/20.

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Fundamentally the week's data flow here in Australia is going to be key.

Today we get quite a bit of important data as we await the RBA tomorrow afternoon and Q1 GDP Wednesday. AIG performance of services industry, the MI monthly inflation gauge, ANZ job ads, and Q1 company gross operating profits.

What’s really interesting about the data – intriguing really in the context of the emerging debate around recession in Australia – is that the Citibank Economic surprise index is at 55.3. That’s the highest level since February 2016. It makes governor Lowe’s statement tomorrow afternoon a really interesting and important one in the context of data and the emerging debate.

And then of course Q1's GDP Wednesday will be huge.

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