AUD/USD Maintains Momentum Despite Disappointing China Trade Data and Soft Australian Inflation Expectations

 [[AUD/USD]] continues to strengthen for the third consecutive day, despite lackluster Chinese trade figures for March and lower Australian Consumer Inflation Expectations for April. The Aussie pair’s rally may be attributed to the early release of Australian employment data.

At the time of writing, the AUD/USD pair records modest gains around 0.6706.

Earlier, the Australian Bureau of Statistics (ABS) reported that Employment Change increased by 53K, compared to an expected 20K and a previous 64.6K. The Unemployment Rate remained unchanged, defying expectations of a 3.6% figure. Moreover, the Participation Rate rose to 66.7%, surpassing market expectations of 66.6%.

Australia’s Consumer Inflation Expectations for April dipped to 4.6% YoY, against an expected 5.3% and a prior 5.0%. It is worth noting that dovish comments from Reserve Bank of Australia’s (RBA) Assistant Governor (Financial System) Michele Bullock the previous day, along with easing inflation concerns and the RBA’s pause on rate hike trajectory, have supported AUD/USD bulls.

US Federal Reserve in Highlights

Conversely, the possibility of a policy shift by the US Federal Reserve (Fed) has increased following disappointing US inflation data and unremarkable FOMC Minutes. US Consumer Price Index (CPI) dropped to its lowest level since May 2021, reaching 5.0% YoY in March, down from 6.0% and against a market forecast of 5.2%. However, the annual Core CPI (excluding food and energy) rose to 5.6% YoY, matching forecasts and surpassing the previous 5.5%.

Additionally, the FOMC Minutes indicated that expectations for rate hikes were reduced due to banking sector turmoil. Reuters reported, “Several Federal Reserve policymakers last month considered pausing interest rate increases after the failure of two regional banks and a forecast from Fed staff that banking sector stress would tip the economy into recession.”

Recent statements from Fed policymakers, including San Francisco Federal Reserve Bank President Mary Daly and Richmond Federal Reserve President Thomas Barkin, suggest easing inflation and challenges to the hawkish Fed and the US Dollar. As a result, Australian yields remain higher, while S&P 500 Futures post modest gains and the US Dollar faces pressure amid cautiously optimistic market conditions.

In conclusion, AUD/USD may experience further gains due to a light economic calendar for the day. However, the US Producer Price Index (PPI) and Fed commentary will be closely watched for clearer direction.

The AUD/USD pair exhibited strong positive momentum, breaking through the 0.6665 level and settling above it, negating the previously anticipated decline and instead embarking on a bullish trend on an intraday basis, with an initial target of testing the 0.6780 level.

As a result, we anticipate a bullish bias today, as the price aims to re-enter the intraday bullish channel to bolster the positive outlook. It is important to note that sustaining the bullish wave depends on maintaining a level above 0.6665.