Market Update – 27th April 2018 – AUD Continues Slide Against Greenback As U.S 10 Yr Yields Breach 3%

The big news over the past day or so (if you follow global marco economics) is that U.S 10 year treasury yields surpassed 3.00% for the first time since 2013. What does this mean for global markets and the USD?

Well if you follow the news it could mean tough times ahead for U.S stocks (higher interest rates means higher repayments on debt and reduced profit margins for businesses) and by default all stock markets globally if we see a U.S stocks selloff, it also means interest rates are likely go higher in the U.S and at a more rapid pace than had first been anticipated. Higher interest rates in the U.S which are already 0.25% higher than here in Australia could also mean a stronger U.S Dollar as investors purchase the U.S Dollar to invest in higher yielding U.S Dollar denominated U.S Treasuries. However, with all that said, and as I have mentioned many times before, growth remains strong globally and with that we are also seeing a pickup in commodities prices which should be positive for the Aussie dollar and the Australian economy more broadly. As such I tend to have the view that while yes, U.S interest rates are moving higher, I don’t think Australia will be too far behind and so AUD/USD continues to look pretty stable around the mid 70’s to me and probably I expect to see more of the same.

Ahead today is the local Producer Prices index which as ForexFactory.com explains is a “leading indicator of consumer inflation – when producers charge more for goods and services the higher costs are usually passed on to the consumer.” As such the data provides a great picture of where interest rates and growth may be headed. The market is expecting to see about 0.4% but that figure has been steadily rising over the past 24 months.

The Bank of Japan decides on interest rates today, however there is likely to be no change again from the -0.1% level. U.S Advance GDP is due at 10.30pm and is a fairly significant peice of economic data out of the U.S each month and should be watched closely. The market is expecting about 2% q/q which is about on trend.

AUD EXCHANGE RATES:

AUD/USD – 0.7557

AUD/GBP – 0.5428

AUD/EUR – 0.6240

AUD/NZD – 1.0698

AUD/JPY – 82.620

USD/BTC – $9,115

OTHER MARKETS: 

All Ords (XAO) – 6,003

Gold – A$1743/oz

Silver –  A$21.89/oz

WTI – US$68.12/barrel

DATA RELEASES TODAY:

AUD – PPI q/q at 11.30am

JPY – BOJ Interest Rates at midday (approximate time)

USD – Advance GDP q/q at 10.30pm

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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick – 0431 278 632 

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