Global equities lower, led by Europe, Aussie dollar stronger, ASX futures 6 points lower

Australia's employment report released yesterday was measured by the market by its prospective impact on interest rates. The employment change--expected to climb by 15,000 jobs--rose by 37,700, and this sent Australia's unemployment rate down to 6.1% versus an expected 6.3%. Equity investors weren't too fussed about this because it diminished the probability of a May rate cut, which would help fuel share investment if it were to come into effect.

Today's first chart shows the ASX 200 (orange line) continuing to sell off through the 11:30am announcement yesterday, while the AUDUSD currency pair (black line) ticks sharply higher. As the afternoon progressed and European foreign exchange traders digested the news, AUD buying continued and at the time of writing the AUDUSD pair is trading at US$77.89, up around 80 pips (0.8% of one US cent) higher than where it was prior to the unemployment rate being released.

Australian interbank cash rate futures also moved quite a bit, and we're now seeing the market factor in a 57% chance of an RBA rate cut to 2.00% in May versus a 76% chance the day previous. There is a lot of selling resistance at these levels for the AUDUSD--as you can see from today's second chart--and I'm not sure these levels just shy of US$0.78 will hold. We'll need to wait until Wednesday next week until the next big indicator (Australian CPI) will be released, which last read at 1.7%. While the CRB commodity index (ETF in orange, last chart) has lifted in April and this will be inflationary, the upcoming CPI data will be for the first quarter (excluding April) and therefore energy prices relating to oil (WTI in black, last chart) are not likely to have a marked effect on this figure. My guess is that there will be a healthy level of scepticism emerge with regard to yesterday's unemployment figures because we're seeing iron-ore related job losses and the market is still getting used to recent changes made to statistical methodology. So therefore, I'd be a seller of AUDUSD at the US$0.78 level coming into next week's CPI release but I would avoid holding tonight, given US CPI will be printed and I don't have a clear view on whether it will come in at its 1.7% expectations. 


Today‚Äôs charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to open a Rivkin Trader account now.

Upcoming economic announcements: Canadian CPI out at 10:30pm tonight, US CPI out at 10:30pm, University of Michigan confidence survey out at 12am, all Sydney time.


This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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