- AUD/USD is consolidating in the mid-0.7700s ahead of January retail sales data.
- The pair was unmoved by a decent flash PMI report, but may react to incoming retail sales data.
AUD/USD is in consolidation mode as the final trading day of the week approaches; the pair continues to trade within the same 0.7720-0.7800ish ranges established earlier in the week, in an early sign that the pair might be forming a pennant, which could be subject to a breakout. The Aussie closed Thursday trade modestly higher versus the US dollar, up about 0.2% or less than 20 pips, with Thursday’s gains bringing the pair very marginally back into positive territory on the week.
Aussie fundamentals
Strength in base metal and crude oil prices has supported the Aussie, though downside in risk assets on Thursday exerted some downward pressure on the currency. January’s Labour Market Report, released during Thursday’s Asia Pacific session, was on the face of it quite a strong one, but has not left any meaningful impact on the price action. Neither has the flash PMI report for February, release at 22:00GMT. Perhaps the preliminary estimate of January Retail Sales, out at 00:30GMT will be able to provoke a reaction. The Aussie is most likely to continue to take its cue from USD flows and global risk appetite dynamics, however.
Turning from data to politics; the Morrison government is expected to legislate a permanent increase to fortnightly unemployment benefits payments as early as next week, reported the Australian. The cabinet will meet on Friday to finalise the package that will enshrine the increase once the $150 coronavirus supplement payments end on 31 March. Given hopes that the Australian unemployment rate will continue to drop in the coming months (implying less Australians needing to rely on unemployment benefits), this increased payments are unlikely to have a noticeable impact on the country’s near-term growth prospects.
Flash Markit PMI Report
AUD was largely responsive to the release of Markit’s flash PMI report for its February survey of Australian business conditions. Australia’s Composite Output Index fell to a four-month low at 54.4, though this implies that economic activity has continued to expand at a firm pace in February (readings above 50 are generally associated with economic expansion). The Services Business Activity Index dropped to 54.1, also a four-month low, while the Manufacturing Output Index fell to 55.9, a two-month low.
Andrew Harker, Economics Director at IHS Markit, commented that “a key positive from the flash PMI data for Australia is the strongest pace of job creation since late-2018… This was a response not only to sustained growth of new orders, but also signs of capacity pressures returning and greater confidence in the future outlook.”. However, Harker cautioned that “on a less positive note, growth in the economy has been accompanied by stronger inflationary pressures… Input costs rose at the sharpest pace in almost five years of data collection, with output price inflation also quickening… (which) has the potential to limit the pace of the recovery going forward.”
Share
