AUD Softens as Fed Rate Cut Expectations Fade

AUD

The Aussie Dollar opens mixed against the majors this morning following day one of the Trump-Xi summit in Beijing. The two discussed trade in detail with Trump stating that US-China ties would soon be "better than ever". Improving US-China trade relations are crucial for the Australian Dollar, given that the Australian economy relies heavily on its exports to Beijing. Asian equities were mixed with the Nikkei -1%, Hang Seng flat whilst the ASX 200 was +0.1%. A quiet domestic calendar day today, as traders wait for the next set of high impact data next Tuesday with the RBA Meeting Minutes set for release.

USD

AUDUSD eases overnight to open at 0.7221, as hotter than expected US inflation data has caused markets to increase Fed rate hike expectations. Wall St. continued to make fresh highs overnight with the Nasdaq closing +1%, the S&P 500 +.8%, and the Dow Jones +.7%. U.S.10-year yields were steady at 4.46%, while Brent Crude rose slightly to $106 a barrel. US April Retail Sales matched consensus at 0.5% MoM, and ex-autos beat slightly at 0.7%, suggesting the US consumer is cooling from the 1.6% MoM gain in March. Initial Jobless Claims edged up to 211K against a 205K consensus. With no US data expected today, markets will be keeping a keen eye on developments in the Middle East and the ongoing discussions between Presidents Trump and Xi.  

EUR

AUDEUR opens relatively flat at 0.6188 after briefly crossing the 0.62 barrier yesterday. European equities closed in the green with the DAX and CAC coming in at +1.3% and +0.9% respectively. A quiet day yesterday data wise as France & Germany both observed a bank holiday. Today will see the release of the ECB Economic Bulletin, which reveals the statistical data that the ECB Governing Board evaluated when making the latest interest rate decision.

GBP

AUDGBP hits fresh 3 year highs at 0.5389 as political uncertainty continues to linger, with UK health secretary Wes Streeting resigning, mounting more pressure on Prime Minister Keir Starmer. UK equities came into the close up, with the FTSE printing at +0.5%. Yesterday, UK Q1 GDP released and surpassed expectations, coming in at +1.1% YoY against a forecast of 0.8%, although the reaction to the markets were muted. 

NZD

AUDNZD opens flat at 1.2224 this morning. BusinessNZ Manufacturing Index released earlier today at 50.5 and showed that the manufacturing sector was expanding in April, but the expansion was only marginal. FPI m/m also came in flat at 0.0%.