The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
The reading came in at just 175,000 when the market was expecting 191,000. This has perhaps prompted some caution heading into Friday’s non-farm payrolls print, which still has analysts concerned that last month’s poor showing was not completely seasonal.
The non-farm payrolls reading is expected to bounce back strongly to 184,000 after having come in at just 74,000 last month. Apart from the ADP reading, we also got the ISM non-manufacturing print which was slightly better than expected at 54. The indecision among traders was quite evident as most of the major risk currency pairs were sidelined through US trade. AUD/USD was one of those pairs as it just held onto 0.89 heading into some key local data. Trade balance data showed a $468 million surplus when the market was expecting a $200 million deficit. The headline retail sales reading was in-line with estimates at 0.5%, while NAB business confidence also showed a sharp improvement to 8.
Central bank watch
This data saw the AUD squeeze even higher, nudging through this week’s highs against the greenback and coming within striking distance of the 0.90 mark. This move higher was seen across other AUD crosses like AUD/JPY and AUD/EUR. The highest level for AUD/USD this week was 0.9086 and that is the next level to look out for.
AUD/EUR is one pair I’m watching closely at the moment given the activity coming up in Europe and the emerging market space. The pair is just testing its January highs and given near-term fundamentals for the AUD and EUR seem to be diverging, there is potential for a short-term squeeze through 0.67. On the AUD front, this week has seen the AUD switch to a neutral bias and today’s positive data added pressure to the upside.
Tomorrow we have the RBA’s statement of monetary policy which could come with some upgrades to inflation forecasts. This could see the AUD extend its gains and encourage fresh buying. The AUD will also be watching emerging market activity closely of which a continued improvement would be positive for risk. On the other side of the equation, the ECB decision is due out today and given the challenges the region has been facing, many analysts expect to hear commentary around unconventional methods the ECB might be looking at to help lift the economy.