- Risk sentiment rebounded pulling Australian Dollar into positive territory
- US durable goods orders rebound more quickly than forecast +15.8% vs 12%
- US labour market looks less encouraging with 1.4 million initial jobless claims vs 1.3 forecast
- Australian Dollar US Dollar exchange rate +0.1% close to daily top US$0.6847
The risk sensitive Australian Dollar is rebounding off session lows and pushing into positive territory following broadly encouraging US data.
At 14:15 UTC, AUD/USD trades +0.1% at US$0.6890. This is at the upper end of the daily traded range after recovering off session lows of US$0.6847.
Risk aversion dominated in early trade amid growing concerns over the rising number of coronavirus cases in the US. With over 38,000 new daily covid-19 cases, investors fear that lockdown restrictions could be reimposed in order to stem the spread of the virus. This could knock the fragile economic recovery off track. These fears saw investors dump riskier assets such as the Aussie Dollar, and equities, instead favouring safe haven assets and currencies such as gold and the US Dollar.
Risk sentiment has since improved following some better than forecast data from the US. US durable goods orders smashed analysts’ expectations, rebounding more quickly than forecast in May. According to the Department of Commerce US durable goods orders grew 15.8% month on month in May, following a -18.1% drop in April. The rebound was well ahead of the 12% increase than analysts had pencilled in.
GDP data was in line with expectations, as the data print confirmed a 5% annual contraction in the first three months of the year. This covers the January – March period, so the next quarter will bear the brunt of the coronavirus lockdown impact.
Finally, US jobless claims data was less positive, but investors, for now, are shrugging this off. Data showed that 1.4 million Americans applied for benefits last week, this was down from 1.54 million the week before but still above forecasts of 1.3 million.
The pace of jobless claims have slowed each week for the past 12 week, however the pace which claims are slowing is frustratingly slow. Continuing claims showed that the pace of rehiring is equally slow with 13.4% of the work force on unemployment benefits.
There is no Australian economic data due to be released for the rest of this week. US data points on personal consumption expenditure, the Fed’s preferred inflation measure, and consumer confidence will be in focus, as will coronavirus statistics.