AUSTRALIA DATA: Net Exports Detracted From Q1 Growth
Not only was the current account deficit larger than expected but Q4 was revised significantly wider, but that meant that it narrowed in Q1. It was $14.7bn in Q1 after $16.3bn in Q4. Net exports detracted 0.1pp from growth while the 0.2pp contribution in Q4 was revised down to a 0.1pp detraction.
- The Q1 improvement in the current account was due to a smaller net income deficit as lower coal prices resulted in less dividends paid to overseas investors. The primary income deficit narrowed $2.2bn to $19.4bn.
- The goods & services surplus narrowed $0.2bn to $5.2bn due to a widening in the services deficit. Exports rose 1.9% q/q while imports picked up 2.2% q/q.
Australia current account $bn
Source: MNI - Market News/ABS
- Goods exports rose 2.9% q/q but were down 2.4% y/y. The quarterly increase was driven by non-monetary gold (volumes & prices rose) and rural goods, while non-rural posted its fifth consecutive quarterly decline. Services fell 1.7% q/q but were up 7% y/y.
- The ABS noted that the Q1 shipment of gold to the US was larger than the total of the last four years, as producers aimed to beat US tariffs. Excluding gold, total goods exports would have declined 1% q/q due to disruptions to coal production and lower prices.
- Merchandise imports were up 3.1% q/q & 2.7%y/y with consumer goods +0.3% q/q and intermediate +7.1% q/q, due to a pickup in fuel prices, but capital down 1.1% q/q, consistent with weak investment. Services fell 0.5% q/q as overseas travel became less popular.
- The terms of trade appear to have stabilised with Q1 +0.1% q/q, second straight increase, to drive an improvement in the annual rate to -4.0% from -4.6%. Export prices rose 2.8% q/q with both goods and services higher, while import prices increased 2.6% q/q driven by goods with services little changed.
Australia terms of trade indices
Source: MNI - Market News/ABS
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USDCAD TECHS: Hits Bear Trigger, New Cycle Low
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
