AUD jumps on trade data and retail sales

Risk FX continues to hold steady on significantly improved sentiment as the Russia/Ukraine tension is downgraded.

AUD/USD was knocking on 0.90 after having come within touching distance of that level in yesterday’s Asian trade. With retail sales and trade balance numbers due out today, expectations were riding relatively high after a string of better-than-expected local releases this week.

Gains in the AUD accelerated upon the release of the data after a much-better-than-expected $1.43 billion surplus (versus $0.1 expected) while retail sales for February surged 1.2%. These stellar numbers saw AUD/USD rally to a high of 0.9033 and finally push through the 0.90 mark.

It is a tough play for the AUD at the moment. We are currently having some good numbers, while the RBA looks like it is starting to jawbone the local currency lower again. Glenn Stevens parliamentary testimony tomorrow now holds the key to how the AUD will finish off the week.

More likely than not he will be looking to talk it down further given its historically high trading level. A scenario that could play out is AUD/USD could rally to test recent highs in the 0.908 region then begin to decline once again. This could then result in a retest of the 0.90 level.

Big couple of days for US data

USD/JPY has pushed through overnight highs and now seems to be gearing up for a move back to 103.

With the safe-haven play swiftly unwinding, yen weakness is back in play. As we head into a crucial couple of days of US economic data, this pair will be the one to watch. Just looking at yesterday’s economic data, the ADP non-farm payrolls reading came in at 139,000; well short of the expected 159,000. Non-manufacturing PMI was also well short of expectations at 51.6, while the Beige Book generally showed activity continues to expand and the outlook remains optimistic.

While the ADP reading disappointed, in recent months a better-than-expected reading actually resulted in the official payrolls reading disappointing. This could be a situation where the disappointing ADP reading could lead to a better-than-expected official reading on Friday.

Having said that, expectations for Friday’s reading are quite high; with the market expecting a jump from 113,000 to 151,000. In fact, many analysts have started downgrading their expectations for Friday’s reading after the sharp decline in the employment component of the non-manufacturing index.

Later today we have US unemployment claims, non-farm productivity, revised unit labour costs and Fed member Plosser speaking. A round of good data could push USD/JPY higher heading into tomorrow’s non-farm payrolls.


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