The Australian and New Zealand Dollars are edging higher on Thursday on improving risk sentiment amid signs of an easing in Shanghai’s COVID lockdown, although investors remain nervous about the state of the global economy.
The Aussie is receiving additional support from a down tick in Australian unemployment to its lowest level in nearly 50 years. The Kiwi is mostly responding to the slight turnaround in sentiment.
At 06:45 GMT, the AUD/USD is trading .6976, up 0.0025 or +0.36%. The NZD/USD is at .6321, up 0.0026 or +0.42%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $68.97, down $0.52 or -0.74%.
Shanghai Eases COVID Restrictions in Some Areas
The COVID-19-hit financial hub of Shanghai will start to allow more businesses in zero-COVID areas to resume normal operations from the beginning of June, a deputy mayor said on Thursday as the city looks forward to the end of lockdown.
Shanghai, fighting China’s biggest ever coronavirus outbreak, has been steadily allowing more businesses to reopen and letting larger numbers of residents leave their homes for the first time in nearly seven weeks.
The city was “striving to achieve a full resumption of work and production as soon as possible”, deputy mayor Zhang Wei told a media briefing.
Dip in Australian Unemployment Rate Supports Rate Hikes
Figures from the Australian Bureau of Statistics (ABS) on Thursday showed Australia’s unemployment rate stood at its lowest level in almost 50 years in April as companies took on more full-time workers. This tightening in the labor market will increase pressure on the Reserve Bank of Australia (RBA) to raise interest rates.
According to the ABS, the Australian jobless rate held at 3.9% in April, from a downwardly revised 3.9% in March, matching market forecasts.
Employment missed the forecast with a rise of just 4,000, though that reflected a large 92,400 gain in full-time jobs being offset by an 88,400 drop in part-time work.
New Zealand First Quarter Producer Price Index Rises
New Zealand producer prices rose in the first quarter. Data from Statistics New Zealand showed on Thursday input prices up 3.6 percent and output prices up 2.6 percent.
Last week, the Reserve Bank of New Zealand’s (RBNZ) quarterly survey of expectations showed business managers forecast annual inflation at 4.88% over the coming year, from 4.4% in the previous survey.
The tightening of the Australian job market strongly suggests the RBA will lift interest rates again in June as it scrambles to contain a flare up of inflation to a 20-year high. Trader odds point toward a move to 0.60% at the June policy meeting.
Meanwhile, the RBNZ is widely expected to increase interest rates by half a percentage point at each of its next three policy meetings to get on top of surging inflation, according to Westpac Banking Corp.
The rate hikes combined with Shanghai’s easing of COVID restrictions seems to be enough to underpin the AUD/USD and NZD/USD on Thursday. However, gains are likely to be capped over the near-term because the Federal Reserve is expected to raise rates at a more aggressive pace.