Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US-China trade talks report progress
The Australian dollar was higher in early Monday trade with reports of progress in US-China trade talks boosting sentiment.
US and China representatives met over the weekend in Vienna, Switzerland.
While no specific trade outcomes were announced, the two countries agree to a new negotiation forum led by US Treasury Secretary Soctt Bessent and Chinese Vice Premier He Lifeng.
The Aussie and kiwi both gained due to their sensitivity to global trade, but otherwise the US dollar was mostly higher.
On Friday, the AUD/USD has slipped to one-week lows before rebounding later the session.
The NZD/USD fell to three-week lows on Friday before later recovering.
Aussie, kiwi see momentum shift
While the trade news has seen a short-term boost this morning, this week remains make-or-break for the Aussie and kiwi dollars.
After significant rallies – the AUD/USD jumped 10.1% from the early April lows while the NZD/USD is up 9.8% in the same period – both currencies have recently lost momentum.
Most significant, over the last week, both the AUD/USD and NZD/USD both saw shifts in the MACD indicator, a key measure of momentum.
As a result, markets will be closely watching how the pairs trade this week. For the AUD/USD, a break below 0.6340 will be seen a negative sign that could signal further losses.
For NZD/USD, a break below 0.5870 will see the market move into a medium-term downtrend.
US inflation, Australian jobs in focus this week
Looking to the week ahead, key inflation readings across major economies will be closely monitored this week.
In the US, the Consumer Price Index (CPI) for April is due on Tuesday, with the year-on-year rate expected to remain steady at 2.4%, while the month-on-month rate is forecasted to tick up slightly to 0.3% from -0.1%.
Australia’s employment data on Thursday could influence RBA expectations, with consensus forecasting a 25k increase in employment and an unemployment rate holding steady at 4.1%.
In the US, initial jobless claims will be released on Thursday, offering further signals on the state of the labor market.
Additionally, US consumer sentiment will be gauged through the preliminary release of the University of Michigan’s Sentiment Index on Friday, expected to show a slight improvement to 53 from 52.2.
Aussie, kiwi climb on trade news
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 12 – 17 May
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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