As the Easter approaches and markets prepare for the four day weekend, the Aussie dollar has received another boost. This time it comes off the back of stronger than expected data out of China. Whilst this increase might not help your purchase of bulk chocolate this weekend, it will definitely help Aussie travellers that are taking advantage of the public holidays by heading overseas. With this in mind, one AUD will buy you:
½ a packet of mini Easter Eggs
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Chinese data boosted by Easter chocolate sugar rush
Yesterday saw the release of China’s Gross Domestic Product (GDP) for Q1, and industrial production and retail sales results for March.
GDP came in at 6.4% YoY which was slightly ahead of the expected 6.3%. Industrial production increased by 8.5% YoY, far exceeding the consensus of 5.9%, and retail sales beat the 8.4% consensus after rising by 8.7%. Economists suggest this data proves the Chinese economy is stabilising and shoulders forecasts of an acceleration in the second half of 2019 (H2).
This data release supported the Aussie dollar in two ways:
- Australia and China have strong trade ties, so an improvement in the Chinese economy is good news for Australia.
- Investment-wise, the AUD is considered a relatively ‘risky’ currency. As a result, there will be an increase in demand for the Aussie dollar when markets are ‘risk on’ and risk appetite has improved. Risk sentiment was boosted by this stronger than expected data overnight.
With all of this in mind, markets don’t expect the AUD to rally higher off the back of this data, as the benefits were potentially already accounted for following the de-escalation of the trade tensions between the US and China. If anything, this data was just the icing on the hot cross bun needed to validate China’s stabilising economic growth.
China and US egg-cited to sign a trade deal
Speaking of the de-escalating tension between the US and China, overnight the Wall Street Journal reported that officials from both countries have scheduled a round of meetings in the hope of closing out a trade deal.
Negotiators are aiming for a signing ceremony in May or June. Should everything go smoothly, it will be good news for Australia and AUD. It also means we can finally stop talking about it after about five months of pain.
Every bunny in Europe is hoping for economic improvement
This morning the European Central Bank (ECB) expressed their hopes of economic improvement, with governing council member Ardo Hansson saying there is “no reason to doubt euro-area growth will pick up in H2 19”.
Hansson’s comment’s come as a form of reassurance after a report was released yesterday showing a significant minority of ECB policymakers are not confident in currency forecasts that predict a recovery in the European economy.
The report is currently weighing on the euro, alongside the fact that the European GDP growth estimate was revised down to 0.5% for 2019. Whilst this is in line with the HSBC’s forecast, it is well below the Bloomberg forecast of 0.9%.
In addition to this, despite the strong Chinese data mentioned above, there was a contraction in Chinese car sales. This contraction is not great news for Germany, which is currently witnessing a slowdown in their manufacturing sector.
What does this mean for Aussie travellers embarking on their European summer vacations? Well, currently the AUD is doing well against the EUR, with the best market rate since mid-December last year. However, this improvement could be shortlived - currency markets can be fickle. It is possible a variety of factors could impact the value of the AUD. Your best bet? Keep an eye on the exchange rate and purchase when it is at a high. Add Rate Guard
to your purchase in-store at Travel Money Oz, and if the rate improves again within 14 days of your purchase we will refund you the difference*.
Aussies hop to work in today’s Labour report
Today the Australian Labour report for March was released and showed that unemployment had edged up by 0.1% to 5%. This comes despite a relatively strong month of job creation. Seasonally adjusted, 48,300 new jobs were created in March and 22,600 part-time jobs were shed. This slight rise can be attributed to more people looking for work. The good news was that the majority of new jobs created were full-time positions.
After this news, the AUD spiked up before returning back to where it started this morning. Overall, this is good news as bad data or a higher unemployment rate could have weighed heavily on the value of the Aussie dollar.
In addition, this data means the discussion to decrease interest rates will more than likely be put on hold for another month - another win for the Aussie dollar.
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