Australia dollar eyes confidence data

The Australian dollar has started the week with gains.  In the North American session, AUD/USD is trading at 0.6275, up 0.60% on the day.

Australia releases business and consumer confidence on Tuesday, with the markets expecting some improvement.  Westpac Consumer Sentiment is expected to rebound and gain 0.4% in February after a 0.7% decline in January.  The National Australian Bank business confidence index is projected to improve to zero in January, after a -2 reading in December.

China’s inflation was a mix, as consumer inflation rose to a five-month high while producer inflation continued to decline.  CPI jumped 0.5% y/y in January, up from 0.1% in December and above the market estimate of 0.4%.  This was the highest level since August.  Monthly CPI rose 0.7%, up sharply from zero in December and an 11-month high, but shy of the market estimate of 0.8%

The producer price index fell 2.3% y/y in January unchanged from December and deeper than the market estimate of 2.1%.  This points to deflation which is likely to worsen if the trade war between the US and China continues.  On Monday, China’s retaliatory tariffs kicked in after the US hit China with tariffs last week.

US nonfarm payrolls decelerate, unemployment falls

US nonfarm payrolls eased to 143 thousand in January, shy of the market estimate of 175 thousand.  Still, there weres signs of strength in the labor market – nonfarm payrolls were revised by 100 thousand in the previous two months and the unemployment rate ticked lower to 4% from 4.1%, below the market estimate of 4.1%.

Average hourly earnings rose 0.5%, up from 0.3% in December and above the market estimate of 0.5%.  Annually, average hourly earnings rose 4.1%, unchanged from the revised December reading and above the market estimate of 3.8%.  The generally positive employment report supports the  case for the Federal Reserve continuing to hold rates, possibly until the third quarter. Just a few months ago, it appeared that the Fed would stay aggressive and continue lowering rates into 2025, but with the economy purring along we might see only one or two rate cuts this year.

• There is resistance at 0.6351 and 0.6430
• There is support at 0.6220 and 0.6141