Reserve Bank in Focus

Australian Dollar:

The Australian dollar remained relatively range bound throughout trade on Monday. Having relinquished last week’s rapid advance the AUD trended lower on reports Chinese Manufacturing PMI contracted throughout April adding to signals growth in the world’s 2nd largest economy and Australia’s largest trading partner is beginning to slacken. The Aussie found support on approaches to 0.78 and touched intraday lows of 0.7801 before edging upward into the daily close. Markets were reluctant to push the AUD beyond 0.7850 as 76% of analysts and traders anticipate an RBA rate adjustment this afternoon. Should the RBA follow the status quo and reduce the benchmark cash rate to new record lows then we anticipate moves toward 0.7750 and 0.7665 (April Low) while the maintenance of the current mandate will encourage a short term rall back toward 0.7950.

• We expect a range today of 0.7665 – 0.7980

New Zealand Dollar:

The New Zealand Dollar offered little to excite investors through trade on Monday. Edging lower early on the back of a softer than anticipated Chinese Manufacturing print the Kiwi managed to find support on approaches to 0.7510 and touched intraday highs of 0.7557. With the economic docket free of fundamental indicators direction through Tuesday will stem from the latest Global Dairy Trade Price index and New Zealand’s Trans-Tasman counterpart as the Australian Reserve Bank releases its monthly rate statement.   

• We expect a range today of 0.7450 - 0.7630

Great British Pound:

The Great British Pound moved lower in thin trade throughout Monday as most enjoyed the May Day long weekend. Investors warily watch Thursday’s General Election and the closely fought race for Government with neither side able to garner any ascendancy to date. It appears no party will be able to govern/take office without forming a coalition and the uncertainty created by a hung parliament will likely cap any significant Sterling advance. In the interim attentions turn to Construction PMI for fundamental direction and guidance.

• We expect a range today of 1.9110 – 1.9500

Majors:

The Greenback continued to recoup much of the losses suffered last week edging higher as improved Factory Orders recorded the biggest increase in eight months. The strong read, coupled with Friday’s rise in consumer sentiment and upbeat vehicle sales report adds scope to suggestions the economy may be stabilising after a dismal first quarter that saw growth grind to halt. While numbers improve the speed of recovery is unlikely to spark an immediate Fed response and analysts continue to adjust net long positions as the timeline of expectation that accompanies a Central Bank rate adjustment extends. Attentions now turn to Friday’s critical Non-Farm payroll report for further direction. The Euro has held onto gains above 1.11 as it appears Greece and its creditor’s edge closer to a compromise. The 19 nation bloc currency found support in comments from European Commission President Jean Claude Juncker. The Belgian suggested that while the Tsipras government still needed “to take major steps in our direction” a Grexit was not an option. Attentions will be closely attuned to any unfolding development as the May 11 debt repayment looms ever closer.

Data releases:

• AUD: AiG Services Index, Trade Balance, Cash Rate and RBA Rate Statement
• NZD: Global Dairy Trade Price Index
• JPY: Bank Holiday
• GBP: Construction PMI 
• EUR: French Gov Budget Balance. Spanish Unemployment, EU Economic Forecasts and PPI m/m
• USD: Trade Balance and ISM Non-Manufacturing PMI