Stronger Aussie Jobs
The Australian dollar was propelled back above 1.01 by another impressive Australian employment report. Consensus forecasts had expected the unemployment rate to tick higher, and overall employment numbers to fall. Instead, 15.5k (cons. -5.0k) new jobs were created while the unemployment rate actually dropped to 4.9% (cons. 5.3%, prev. 5.2%). As a result, our Australian economics team now thinks another RBA cut in June is very unlikely. The currency gave back some of its gains though after Chinese trade data showed lacklustre total export growth and virtually flat total imports. However we note that Chinese imports from Australia were up sharply and demand for iron ore and copper continues to grow. Today, we expect investors to take some comfort from a scheduled transfer of cash to Greece, which should alleviate concerns about a May 18 bond redemption. However, uncertainty about the post-election political landscape continues, and this is already causing the EU/IMF to reassess its approach to external financing. For example, today’s tranche is to be reduced to only EUR 4.2 bn as a direct consequence of the political uncertainty, with the remaining EUR 1 bn deferred. Questions continue to linger too about Spanish banks in the wake of the government’s decision to partly nationalize a large domestic lender. All things considered, there are plenty reasons to maintain our bearish EURUSD stance and we remain comfortable with our 3m forecast of 1.25. Elsewhere today, policy decisions from the BoE and Norges Bank are due, both of which should produce ‘no change’ verdicts in our view. Fed Chair Bernanke also speaks.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank