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AUD Hits 3-Week High, Job Numbers Loom

After a quiet start to the week, the Australian dollar has registered strong gains in Wednesday trade. Currently, AUD/USD is currently trading at 0.7685, up 0.55% on the day. Earlier in the day, the pair touched 0.7695, its highest level since March 23rd. On the fundamental front, Australia releases key employment numbers on Thursday (1:30 GMT). The economy is estimated to have created a modest 35.2 thousand jobs in March, while unemployment, which has been steadily falling, is expected to have ticked lower to 5.7%, down from 5.8%.

Consumer confidence sparkles

There was positive news on Wednesday, as Australia’s Westpac Consumer Sentiment index climbed 6.2% to 118.8 in April, up from 111.8 a month earlier. This marked the highest level since August 2010, and Westpac called the release “an extraordinary result”, especially given that the AUD90 billion JobKeeper wage subsidy programme has ended. There were concerns that consumer confidence might dip lower as a result, but these fears proved to be unfounded.

The increase in consumer sentiment goes hand-in-hand with this week’s NAB business survey for March, which showed that business conditions rose from 17 to 25, a record high. Business confidence dipped but still remains well above its long-term average.

The significance of the high level of optimism across the private sector is that this should translate into more spending by businesses and consumers, which could well translate into higher inflation levels in the coming months. Consumers are already feeling the impact of higher prices, as the housing market has been red-hot. Property prices soared in March at their fastest rate in 30 years, raising fears of a housing bubble.

An increase in CPI would mean that the RBA would need to re-examine its dovish monetary stance, and could lead to a rate hike earlier than anticipated – the central bank’s current stance is that it does not plan to raise rates prior to 2024.

AUD/USD Technical

  • AUD/USD is testing resistance at 0.7668. Above, there is resistance at 0.7717, which has held since mid-March
  • 0.7579 is the first line of support. This is followed by support at 0.7539
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