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FIVE at FIVE AU: ASX up today, but what's next for the Aussie dollar?

Published 27/05/2024, 04:05 pm
© Reuters.  FIVE at FIVE AU: ASX up today, but what's next for the Aussie dollar?
AUD/USD
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The Australian share market was up today, gaining 59.80 points or 0.77% to 7,787.40 and crossing above its 50-day moving average.

Top-performing stocks today were Neuren Pharmaceuticals Ltd and Lendlease Group, up 10.24% and 10.10% respectively.

The index has lost 0.33% for the last five days but sits 1.54% below its 52-week high.

Real Estate led the charge during the afternoon session, up 1.70%, followed by Consumer Staples (1.34%) and Communication Services (1.22%), while Energy was the only sector in the red, down 0.08%.

Where next for Aussie dollar?

The Australian dollar has had a good run lately, prompting all imminent overseas travellers to rub their hands together in glee before it plummeted last week. IG senior analyst Tony Sycamore chronicles the heartbreak.

“It's been this way for a while now. Just as the AUD/USD appears set to make a meaningful move higher, the tide turns, leaving it stranded high and dry.

“Last week was no exception. The AUD/USD, perched at a four-month high, fell for four consecutive sessions before the shorts squared up ahead of the weekend, sparing the local unit further blushes.

“Behind last week's colossal collapse, softer domestic data, including consumer confidence and jobs data, up against stronger US economic data and hawkish Fed speak, which supported the US dollar.

“Throwing fuel on the fire, an overdue pullback in commodity prices after a good run higher.

“This week, the key local drivers of the AUD/USD will be retail sales data on Tuesday, which are expected to rise by 0.1% after falling by 0.4% in March.”

Monthly CPI

There were higher-than-bargained-for inflation figures in April.

Headline inflation in the first quarter of 2024 rose by 3.6% year-on-year, down from 4.1% in the prior period but above market expectations of 3.4%.

Trimmed Mean inflation increased by 4% year-on-year, above market expectations of 3.8%. Separately, the Monthly CPI indicator for March rose 3.5% year on year, above market expectations, looking for a rise of 3.2% year on year.

“As April is the first month of the new quarter, this Monthly CPI indicator will only provide updates on about 60% of the basket,” Sycamore notes.

“Additionally, it will be weighted towards goods rather than the troublesome service components. The expectation is for the Monthly Indicator in April to ease marginally to 3.4% year on year from 3.5%. The rates market starts the new week, pricing in 8bp (~30%) of RBA rate cuts for December.”

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