AUD Remains Near Two Year Highs

The major US indices were little changed on Friday as the UN debates whether to apply sanctions to North Korea, particularly cutting its oil supply. Such a cut would have to come with the support of China as most of North Korea’s oil comes from China. With the short attention span that it has, the market seems less focussed on North Korea for now and it would probably take a further escalation to spook markets again.   

The AUD remains near two-year highs at US$0.805 with the US dollar index (DXY) down at a two-year low of 91.33. This week, on Thursday, we get Australian employment data which has been unexpectedly strong in the last few months. Consensus estimates are for an increase in employment of 19,200 jobs and a steady unemployment rate of 5.6%. The strong employment data of recent months provides the opposite signal to the strong AUD from the point of view of the Reserve Bank (RBA) which has to decide the appropriate level of interest rates. The RBA board will surely be hoping that the US continues its rate hiking path to put some downward pressure on our currency and give the RBA more scope to raise rates.

Later in the week the US releases its CPI and retail sales data which are important data points for the Fed in its interest rate decision. The CPI is critical as it is a measure of inflation which the Fed has desperately been trying to boost above 2%. Expectations are for monthly core (excludes food and energy) CPI growth of 0.2%.

Data Releases:

–    No Significant Data

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This article was written by William O’Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.