AUD edges higher as equities drag risk assets higher

Daily Currency Update

The Australian dollar crept upward through trade on Tuesday, buoyed by improvements in broader risk tones and an ongoing recovery in oil prices. While moves across currency markets were largely muted the AUD consolidated its push back above 0.64 touching 0.6475 before correcting lower. The RBA offered little to excite investors, maintaining the cash rate at 0.25% while making only a small change to its QE program. The board elected to broaden its rules on acceptable collateral to include investment grade corporate bonds in a bid to smooth market functionality. Investors largely ignored the announcement while also disregarding an ABS report that showed job losses in the 5 weeks since the lockdown began have risen to 7.5%. Markets had largely priced in the additional hit to the labour market and when we consider 6% of those jobs were lost in the first 3 weeks of the lockdown the marked slowdown in the pace of job losses suggest the governments fiscal stimulus measures are providing the stopgap needed to maintain employment through the short term. That said, there are concerns the unemployment rate could drop sharply over the coming months, especially if consumers are slow to respond to easing social distancing restrictions.
Attentions today turn to retail sales data, albeit the data provides a backward look at consumer spending in March and will fail to take into account the full lockdown period. Instead we turn our focus to tomorrow’s Trade Balance print as a marker offering direct insight into currency demand, while risk sentiment will continue to act as the driving force governing direction in the interim.