USD extends decline while AUD top performer; Stronger Australian employment data see's AUD and NZD climb against USD

By Kymberly Martin

USD weakness continued overnight. The AUD was amongst the strongest performers over the past 24-hours.

After gaining some ground yesterday afternoon the general USD downshift then extended overnight. The move was briefly curtailed in the early hours of this morning by a stronger than expected Philadelphia Fed business survey. However, weakness soon resumed. The USD index trade at 97.40 this morning, though still some way above early-April lows.

The AUD/USD has been one of the best performers over the past 24-hours. The currency gapped higher after the much stronger than anticipated AU employment report. Our NAB colleagues believe this report provides reasonable evidence that the transition in the Australian economy is occurring. Indeed, if confirmed in coming months, the data would argue against much further easing by the RBA in the near term, beyond one further cut. They suggest the non-mining economy is already broadly generating sufficient jobs to stabilise unemployment, even before the full effects of the February rate cut have been felt.

The upward momentum in the AUD/USD continued overnight.  It has risen around 1.7% since yesterday morning to trade at 0.7810 currently.

Despite Greek’s woes rumbling along in the background the EUR/US was on the ascendancy overnight. The IMF’s Lagarde said she would not support Greece delaying a due payment, essentially eliminating this as a way for Greece to buy more time in its negotiations. Peripheral European to German bond spreads continue to push wider. However, the EUR/USD has risen from intra-night lows around 1.0630 to 1.0790.

NZD/USD appears to have ridden higher on the AUD’s coat-tails overnight. Yesterday’s strong AU report also encouraged the market to reduce expectations for a RBNZ rate cut. The market now prices 24bps of cuts in the year ahead, down from 29bps previously. The NZD/USD trades at 0.7670 currently. It is approaching resistance at the late-March highs near 0.7700.

The NZD/AUD was the notable casualty of yesterday’s AU data. The cross plummeted from around 0.9880 to 0.9820 on the data. It subsequently found some support at 0.9780 and has crawled back to 0.9830 overnight.

There is a dearth of local data today. Tonight, the UK employment report has potential to influence trading in the GBP. There will also be a spotlight on inflation as the Eurozone, Canada and US deliver CPI releases.

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