AUD to Attract Investors' Attention in G10 This Week

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Australian Dollar
Photo illustration shows Australian one dollar coins surrounding a U.S. one dollar note in Sydney

The Australian dollar (AUD) will attract investors’ attention this week, as the data from China and domestic employment report likely to give direction to the commodity currency.

“AUD will be in a spotlight within G10 space with a series of cyclical activity and price data from China, as well as local labor market data. Our economists expect slightly below-consensus outcome for these data overall, suggesting that the risk is tilted towards the downside in AUD,” said a note from Barclays Capital.

Although fears over hard landing of the world’s second largest economy had eased to a little extent by the release of the better-than-expected official China's Purchasing Managers’ Index (PMI) data last week, the gross domestic product (GDP) growth in the first quarter remains a key. China’s official PMI rebounded strongly to an 11-month high of 53.1 in March from 51 in February.

“A series of key data release, including Q1 GDP, will give us an opportunity to look into the cyclical activities and prices to evaluate the true state of the Chinese economy. Although our baseline case for the soft-landing remains intact, our China economists expect slightly below-consensus numbers overall and if correct, likely AUD negative,” said the note.

Besides, Australia’s labor market data will be released this week, which could also become another source of concern for AUD if the data surprises to the downside. Markets expect the jobless rate in Australia to rise to 5.3 percent in March from 5.2 percent in February, while the number of employed people to rise by 6,000 against the sharp decrease of 15,400 in the previous month.

“Cyclical activity data have been weakening lately in Australia and any sign of weakness in labor market would likely add to the concerns about domestic economy and additional AUD negative,” said Barclays Capital.

The Reserve Bank of Australia (RBA) held the key interest rates unchanged last week, however, keeping the doors open for further easing at the May meeting.

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