Last night thanks to falling commodity prices and some positive US employment data, the AUD feel dramatically against most majors.
The Unemployment claims out of the US were released last night; this proving the US economy is well on its way to recovery. The figure last night came in at 265,000 claims made; the market was expecting 301,000 claims to be made. Therefore the market reacted quite positively to the announcement.
Although Unemployment claims is generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour-market conditions. Therefore, the market sees long term improvement the more people employed the bigger the economic stimulation.
On the domestic front, the Australian economy is struggling in most aspects of the economy. The Reserve Bank of Australia (RBA), has been strongly hinting an interest rate cut in the near future. The factor making these cuts more realistic is the swiftly declining inflation rate in Australia. The Inflation rate or Consumer Price Index (CPI) has declined from 3% in October-November to 1.7% in January. This was a leading factor of why the RBA was not considering a cut, late 2014.
Now that the inflation rate is below the 2-3% targets, it clears the way for expansionary monetary policy, this most probably inform of a interest rate cut in order to stimulate the economy.
Today we have the Producer Price Index (PPI); this will be the last Australia macro release for the week. It will contribute to the inflation pressures for Australia as the price paid by consumers relate to the final wholesale cost of producers. The expectations for this result are set to be release at 0.3% from 0.2%. This may assist the AUD heading in the weekend. Anything above the expected figure should provide the AUD with some much needed buoyancy.