AUD range bound ahead of key US employment data

Australian Dollar:

The Australian dollar dipped marginally lower yesterday as Chinese Manufacturing output wrote in below analyst expectations. With markets predicting a jump to 50.5 official numbers saw a 50.4 reading proffered. While any reading above 50 still indicates expansion the slowdown in China’s economy has had a dampening effect on AUD demand. With little else on the domestic docket to shape direction the Aussie continued to drift lower throughout the North American session as a mix of stronger data and improved labour market expectations helped boost Greenback claims. With PPI numbers due locally the main focus will be on US non-farm payrolls and unemployment rates as the primary drivers of direction leading into the weekend with investors searching for a catalyst to push the AUD outside recent ranges.

• We expect a range today between 0.9220 – 0.9320

New Zealand Dollar:

The NZD has held onto gains above 0.86 and opens this morning a tick higher buying 0.8624 US cents. A session void of local data the Kiwi took its bearings from Chinese and US data announcements. An increase in US unemployment claims from 330,000 to 344,000 surprised markets and investors looked to the higher yielding asset. With attention now turning to tonight’s Non-Farm Payroll and unemployment rate notices as the primary forces driving direction moving into the weekly close we expect the NZD to remain relatively range bound throughout today’s domestic session.  

• We expect a range today between 0.8580 – 0.8680

Great British Pound:

Cable has appreciated for a sixth consecutive day as strong housing and manufacturing data pushed the Pound to new four year highs. Sterling broke higher and drove through 1.69 on the back of better than expected Manufacturing output for the month of April. Jumping from 55.8 in March to 57.3 last month the stronger reading is the highest since November last year and is yet another signal that the UK economic recovery continues to strengthen. In addition a strong increase in house prices both month to month and on an annualised basis adds to mounting pressure placed on the Bank of England (BoE) to adjust monetary policy and increase interest rates. Property values have jumped some 10.9% over the previous 12 months and while there is little threat of the market boiling over the figures mark the biggest annual gain since 2007 and will certainly force BoE officials to monitor current policy guidelines. Having touched an overnight high of 1.6912 Sterling opens this morning at 1.6889.

• We expect a range today between 1.8150 – 1.8270

Majors:

The USD opens a tick higher this morning against its European and Japanese counterparts after a session peppered with a mix of soft and strong data readings. Increased unemployment claims, softer manufacturing prices and weaker construction spending were offset by an increase in personal spending and income while manufacturing output (ISM manufacturing PMI) wrote in above expectations. In what was a quiet European session with Germany, Italy and France all enjoying the May Day Bank Holiday the combined currency rallied in early trade as speculation/bets the European Central Bank would unveil a quantitative easing plan at next week’s meeting (may 8th) were reduced. The Euro advance was halted as predictions for improved Non-farm payrolls brought about a Greenback rally and the bloc unit withdrew below 1.3870. Attentions are now clearly directed toward tonight’s US employment numbers and European manufacturing data as the markers for direction leading into the weekend.

Data releases

• AUD: HIA New Home Sales and PPI Q/Q
• NZD: ANZ Commodity Prices
• JPY: Household Spending, Unemployment Rate and Monetary base
• GBP: Construction PMI
• EUR: Unemployment Rate, Spanish Manufacturing PMI, Italian Manufacturing PMI and Eurozone Final Manufacturing PMI
• USD: Non-Farm Employment Change, Unemployment Change, USD Average Hourly Earnings and Factory Orders.