Aussie, kiwi at three-month highs ahead of China trade numbers

Aussie, kiwi climb to three-month highs

The Australian and New Zealand dollars neared three-month highs yesterday. Global markets were mostly quieter on Monday, with the UK and parts of Europe closed for public holidays as investors digested last week’s volatile period of central bank meetings and worries about the US banking system.

US shares were mixed, with the S&P 500 and Nasdaq both moderately higher, with the main focus on the so-called SLOOS report – Senior Loan Office Opinion Survey – the first major reading of US lending activity after March’s Silicon Valley Bank failure.

The survey found lending standards had tightened and loan demand had eased. The news kept US shares, and the US dollar, broadly muted.

China trade balance due

The main focus today is on the Chinese trade balance for April.

Chinese exports have bounced back strongly so far this year but imports have fallen in a sign of slowing demand into the future, especially in manufacturing and consumption.

This slowdown in manufacturing demand has been seen a collapse in shipping costs, with costs for shipping from China to Australia and New Zealand now back to pre-pandemic levels.

There is no set time for the release of China trade data, but it is usually around 12.00pm AEST.

Budget boosted by terms of trade, but effect likely short lived

Apart from the Chinese trade balance, Australia sees consumer sentiment and retail sales released this morning.

Tonight, the Australian government’s budget is due. A windfall from high commodity prices and a low Australian dollar has boosted the local terms of trade.

However, the effect from this commodity windfall – partly driven by the impact on energy prices from the Russian invasion of Ukraine – might be short lived.

A recent weakening of commodity prices could weigh on the terms of trade and is one reason for the AUD’s weakness in the first part of 2023. Historically, the Federal Budget has little effect on the Australian dollar.