U.S. currency five-dollar bills
Sheets of former U.S. President Abraham Lincoln on the five-dollar bill currency are seen through a magnifying glass at the Bureau of Engraving and Printing in Washington March 26, 2015. Reuters/Gary Cameron

Bell FX Currency Outlook: The Australian Dollar continued its rally on Friday, making new 2016 highs above 74 cents.

Australia: The AUD is above 0.7400 for the first time since August, having touched a high of 0.7443. It was up 1.2% for Friday, the third best performing G10 currency (behind the NZD and NOK), although it has opened up slightly lower this morning, currently trading just above 0.7400. This continued rally came despite a slightly weaker than expected retail sales release on Friday and an impressive headline figure for US nonfarm payrolls (see below). Retail sales rose a weaker-than-expected 0.3% in January (mkt: +0.4%), following a flat outcome in December. The data disappointed for the second consecutive month and momentum appears to be slowing. How the property and labour markets develop from here will be important for retail sales going forward, especially with the peak stimulus from lower petrol prices likely behind us. Policymakers are closely watching consumer spending, with stronger growth a critical part of pushing overall economic growth back to trend levels. It is a quiet day on the data front. The main domestic releases this week are the NAB business confidence numbers tomorrow, followed by Westpac consumer confidence data on Wednesday.

Majors: The USD initially gained ground against its main rivals after the employment data was released, as investors focused on the headline number showing 242,000 nonfarm jobs were created last month (190k expected). January’s reading of 151,000 new jobs was also revised higher to 172,000, signalling that the US labour market started the year on stronger footing than previously believed. But the US currency soon turned lower against the EUR as focus shifted to a decline of 0.1% in average hourly earnings (+0.2% expected), a key early indicator of inflationary pressures. The DXY ended the session down 0.3%. Also of note China held its 2016 National People’s Congress meeting for 2016 on Saturday. A new (lower, but still ambitious) growth target of 6.5-7% was announced. In order to achieve that, the target for M2 money growth was lifted (from 12% to 13%) and a larger fiscal deficit target of 3% was announced compared with around 2½% for 2015. The week ahead is quiet for US data, with the main focus on ECB and RBNZ interest rate decisions.

Economic Calendar 07 MAR

  • AU AiG Perf of Construction Index Feb
  • AU ANZ Job Advertisements MoM Feb
  • CH Foreign Reserves Feb
  • US Labor Market Conditions Index Change Feb

Bell Fx

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