Daily Digest Market Movers: Australian Dollar extends losses after weaker Aussie data
- The AiG Australian Industry Index decreased by 3.6 points to hit -8.9 points in April, marking continued contractionary trends over the past two years. March's figure stood at -5.3.
- The ASX 200 began Wednesday trading lower, with all 11 sectors experiencing a decline. This drop followed robust US employment data that rattled Wall Street, raising concerns about sustained inflation and the potential for the US Federal Reserve (Fed) to prolong higher interest rates.
- According to the Financial Review, ANZ predicts the Reserve Bank of Australia will start reducing interest rates in November, spurred by last week's inflation data surpassing expectations. Likewise, Commonwealth Bank, Australia's largest mortgage lender, has revised its forecast for the RBA's first interest rate cut timing, now projecting a single cut in November.
- During the first quarter, the US Employment Cost Index surged by 1.2%, marking the highest increase in a year and surpassing expectations of 1.0% as well as the previous figure of 0.9%. This latest data highlights enduring wage pressures, which could amplify the effects of persistent inflation within the US economy.
- In March, the seasonally adjusted Australian Retail Sales experienced a decrease, failing to meet expectations. This marked the first decline since last December, with turnover decreasing across all industries.
- According to the CME FedWatch Tool, the likelihood of the Federal Reserve maintaining interest rates at their current level during the June meeting has risen to 91.6%, climbing from 81.2% a week ago. This narrative of prolonged higher rates from the Fed is bolstering the US Dollar and posing a hurdle for the AUD/USD pair.
- The Economic Times reported on Monday that Fed Chair Jerome Powell mentioned it would likely take "longer than expected" to gain confidence that inflation is progressing towards the central bank's 2% target. Powell added that the central bank can maintain rates at a high level "as long as needed." Fed Governor Michelle Bowman expressed her view of "upside risks" to inflation. Meanwhile, Minneapolis Fed President Neel Kashkari raised the possibility of no rate cuts occurring this year.
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