AUD/USD is subdued in the Monday session. Currently, the pair is trading at 0.7048, up 0.06% on the day. On the release front, there are no Australian events. Later in the day, China releases manufacturing PMI, which is expected to tick up to 50.7 points in April, after a score of 50.5 in the previous release. The 50-level separates contraction from expansion, so a reading just above 50 points to stagnation. The U.S. releases Core PCE Price Index and Personal Spending for February and March. The markets are expecting a strong gain of 0.7% for Personal Spending in March. On Tuesday, the U.S. releases Chicago PMI and CB Consumer Confidence. Australia will post the AIG manufacturing index.
It was a brutal week for the Aussie, which dropped 1.5 percent. A combination of weak data out of Australia and sharp U.S. numbers sent the currency reeling. Australian CPI slowed to 0.0% in Q1, shy of the estimate of 0.2%. This marked the weakest reading since 2016. Inflation remains well below the RBA’s target band of 2-3%, and this disappointing CPI release underscores concerns that the target band will remain elusive. Soft inflation and a somber RBA have raised speculation that the RBA could lower rates in a bid to stimulate the economy, perhaps as early as this summer. Investors will now shift their attention to China, as the Aussie is sensitive to key Chinese releases. A strong Chinese manufacturing PMI could boost the Australian dollar.
Meanwhile, U.S. numbers impressed late last week, as the U.S. dollar made broad gains. Durable goods orders climbed 2.7%, crushing the estimate of 0.7%. Core durable goods orders gained 0.4%, marking a 9-month high. This was followed by an initial GDP release of 3.2% in Q1, well above the estimate of 2.2%. This was much stronger than Final GDP for Q4, which came in at 2.2%.
