The Australian and New Zealand Dollars hit multi-month highs last week, supported by surging commodity prices and a plunge in U.S. Treasury yields, following the release of a weaker-than-expected U.S. employment report that likely dampened the possibility of an earlier tightening by the U.S. Federal Reserve.
The early support for the Aussie last week was provided by a sharp rise in prices of Australia’s top export earner, iron ore. According to Reuters, futures of the key steel making ingredient vaulted to a record high last Friday pushing spot prices to the highest-ever above $200 a tonne.
Reuters also reported the antipodean currencies, traded as a liquid proxy for the Chinese yuan, were also boosted by impressive trade data from China which showed import growth hitting a decade high. China’s imports of iron ore are up 6.7% this year so far while those of natural gas has surged more than 22%. Both commodities are Australia’s top export earners.
Earlier in the week, the Reserve Bank of Australia (RBA) upgraded forecasts for the country’s economy, though inflation and wages growth are seen lagging in a sign monetary policy will remain highly accommodative for years to come.
This Week’s Outlook
Australia’s government will release its 2021/22 budget outlook on Tuesday where it will unveil a record deficit but is still likely to keep its spending tap open to help support jobs and growth.
A jump in the consumer price index could make traders forget about Friday’s disappointing U.S. Non-Farm Payrolls report.
Traders will also get to hear the reactions to Friday’s jobs report from several Federal Open Market Committee (FOMC) members.