Daily Digest Market Movers: Australian Dollar retreats due to less hawkish RBA

The Commonwealth Bank of Australia (CBA) has revised down its forecasts for the Australian Dollar at the end of 2024 is 0.69, down from 0.71 previously. CBA cites factors such as the interest rate gap and elevated US Treasury bond yields, which are bolstering the US Dollar. The Federal Reserve's cautious stance on high inflation and its reluctance to implement rate cuts further support the US Dollar, as reported on forexlive.com.

The US Bureau of Labor Statistics (BLS) reported that the number of individuals filing for unemployment benefits surpassed expectations. Initial Jobless Claims for the week ending May 3 increased to 231,000, exceeding estimates of 210,000 and marking a rise from the previous week's figure of 209,000.

Chinese Imports (YoY) surged by 8.4% in April, surpassing forecasts of 5.4%. Exports grew by 1.5%, higher than the anticipated 1.0% gain. These latest figures brought a positive surprise amidst concerns of potential additional tariffs on Chinese goods by the United States (US). However, Trade Balance USD increased to $72.35 billion from March’s reading of $58.55 billion, slightly below the expected $76.7 billion.

Australian Retail Sales (QoQ), measuring the volume of goods sold by retailers in Australia, declined by 0.4% in the first quarter of 2024, swinging from the 0.4% growth in the fourth quarter of 2023.

RBA Governor Michele Bullock stressed the importance of staying alert to inflation risks. Bullock believes current interest rates are appropriately positioned to guide inflation back towards its target range of 2-3% by the second half of 2025 and to the midpoint by 2026.

Societe Generale has released a note regarding the Reserve Bank of Australia, emphasizing their view that the RBA's optimism regarding economic growth is misplaced. The institution anticipates a downturn in economic growth in Australia, with the potential for surprises on the downside. They attribute this forecast partly to the prevalent effects of RBA rate hikes filtering into the economy.

According to a Reuters report, Federal Reserve Bank of Boston President Susan Collins said on Wednesday that a need for a period of moderation in the US economy to achieve the central bank's 2% inflation target. Collins highlighted that demand will need to ease to reach this goal. She expressed confidence that Fed policy is well-aligned with the current economic outlook.

On Tuesday, Minneapolis Fed President Neel Kashkari said that the prevailing expectation is for rates to stay steady for a considerable duration. Although the likelihood of rate hikes is minimal, it's not entirely ruled out.