U.S weakness fuels bullish Aussie sentiment

Australian Dollar:

The Australian Dollar continued to enjoy the benefits of bullish sentiment throughout trade on Wednesday as a softer than anticipated Retail Sales print was largely ignored. Supported by another set of weaker US macroeconomic indicators the Aussie moved comfortably through 0.80 to touch intraday highs of 0.8031. Preliminary US employment data failed to live up to analysts’ expectations and enhanced the shadow looming over the sluggish US economy forcing traders to reassess expectations surrounding the timing of normalising Federal Reserve monetary policy.  Attentions now turn to domestic labour market data with a strong print likely to solidify a new short term range between 0.78 and 0.81.     

• We expect a range today of 0.7810 – 0.8100

New Zealand Dollar:

The New Zealand dollar tumbled yesterday as labour market data missed the mark. While the unemployment rate remained at 5.8% quarterly employment change fell 0.5% on quarter four 2014 comparisons and failed to meet market expectations. The Kiwi plunged through 0.75 relinquishing a full cent against its US counterpart touching intraday lows of 0.7458 before finding support. Attentions now turn to Key US Data events for direction into the weekly close.

• We expect a range today of 0.7420 - 0.7630

Great British Pound:

The Great British Pound broke above 1.5250 through trade on Wednesday supported by a stronger than anticipated Services PMI print and USD sell off. Sterling rallied as reports showed the service sector expanded at a faster pace than economists initially estimated throughout April while a string of poor macroeconomic fundamentals fuelled a USD bearish run. Gains were capped however as uncertainty lingers ahead of today’s upcoming general parliamentary election with focus squarely honed on who will take office for the next 5 years.  

• We expect a range today of 1.8810 – 1.9380 

Majors:

The U.S Dollars downward trajectory continued through trade on Wednesday as increasing European yields and soft data hampered demand for the world’s base currency. The ADP’s preliminary non-farm payroll print suggests just 169,000 jobs were added to the economy through April, a read well below expectations. The report throws into question analyst estimates for the final NFP print due Friday and reinforces expectations the Fed will retain its cautious outlook and delay an upward rate adjustment in the short term.

The Euro touched 10 week highs as German bund yields rose to 0.6 percent, the highest return in 5 months. The rally alleviates concerns yields would turn negative and narrows the gap between US and European bonds. The 19 nation bloc unit touched intraday highs of 1.1371 finding additional support in stronger than expected services PMI. The Service sectors of Spain, Italy, France and the wider Eurozone all expanded throughout April adding credence to the ECB’s stimulus measures.

Attentions now turn to the ever unfolding Greek debt crisis and the Friday’s NFP report for direction into the close.

Data releases:

• AUD: AIG Construction Index, Employment Change and Unemployment Rate
• NZD: No Data
• JPY: Monetary Base y/y
• GBP: Parliamentary Elections   
• EUR: Retail PMI, German Factory Orders m/m, French Industrial Production m/m, French Trade Balance and Spanish 10 Year Bond Auction.
• USD: Challenger Job Cuts y/y, Unemployment Claims and Consumer Credit