The US dollar bounce ensured AUD/USD was firmly rebuffed on a probe of the 200 day moving average at 0.7815, with the pair starting the week not far above the 2018 low of 0.7643, explains Sean Callow, Research Analyst at Westpac.
Key Quotes
“But if risk appetite improves a little and this month’s rise in industrial commodity prices is sustained, AUD/USD should be able to stabilize, trading mostly 0.7650-0.7750 over the week.”
“Of course, this assumes no shock from Australia’s critical Q1 CPI data on Tuesday. Australian inflation has printed below the Bloomberg median forecast every quarter since Q4 2016 (inclusive), so inflation could continue to surprise on low side. Westpac’s forecast for the headline CPI is 0.5%qtr, holding the annual pace flat at 1.9%yr, with the market median also 0.5%qtr. Core inflation seems set to remain below the bottom of the RBA target band (1.9%yr).”
“A CPI reading close to our forecast should be taken calmly by markets but there will be considerable tension given the shock low reading 2 years ago which set up RBA rate cuts in May and August 2016.”
“Globally, in addition to the US data, markets will be watching the policy meetings at the European Central Bank and the Bank of Japan. Both central banks should be firmly on hold, but the accompanying commentary could well impact on AUD/EUR and AUD/JPY.”
“Event risk: Aust Q1 CPI, RBA’s Kent speaks, Germany Apr IFO business survey, US Apr consumer confidence (Tue), ANZAC Day holiday – Aust and NZ (Wed), ECB policy decision (Thu), S Korea-N Korea summit, BoJ policy decision, UK Q1 GDP, US Q1 GDP and employment cost index (Fri).”
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