The Takeaway: Australian Westpec Consumer Confidence Index declined by -5.1 percent in April -> Weaker consumer confidence was in line with RBA official’s comment on strong Australian dollar -> AUD/USD extended loss
The Australian Dollar declined against most of its counterparts after Australian Westpec Consumer Confidence index declined by -5.1 percent to 104.9 in April, versus an increase of 2.0 percent in March. The decline put an end to a run of fourth consecutive months of increase.
In one and a half hours leading up to the release, Australian Treasurer Swan spoke in the Bloomberg Economic Summit to address the steps that Australia should take to maximize its competitive advantages. Swan states that the Australian dollar is “defying gravity” while commodity prices fall. His comments may fuel speculation that the RBA will cut rate this year in an effort to curb the strength of the Aussie. In fact, the market is pricing in a 19 percent probability that RBA will cut rate by 25 bps in their next meeting on May 7.
Against the backdrop that China's CPI has restrained in March, it alleviated concerns about the negative impact on Australian exports sector. However, the focus is now switched to the domestic market.The weaker consumer confidence shows that the impact of the high Australian dollar suggested by Treasurer Swan may have reflected on the domestic front, as disposable income declines with companies’ profitability. Looking ahead, the Australian employment report that is due for release on April 11 will provide further guidance to the path of RBA policy, as reading above the previous 5.4 percent would reinforce the case for an interest rate cut.
The AUD/USD shed 13.7 pips after the report. At the time of writing, the Aussie dollar fetched US$1.04839.
AUD/USD 1 Minute Chart
Chart Created by Robin Leung using Marketscope 2.0
