AUD edges higher ahead of economic deal with Japan

Today’s headlines

What’s happening: The Australian dollar edged higher versus the US dollar this morning but remained on course to recording its first weekly loss in a month.

What happened: Although investors remained cautious amid the prolonged Middle East war, sentiment for the AUD improved on news of a possible economic deal between Australia and Japan.

Prospects of the Reserve Bank of Australia raising interest rates next month lent support to the Australian dollar.

Why it matters: The Australian currency, which is generally considered a proxy for global risk appetite, has been under pressure due to investor concerns around geopolitical tensions in the Middle East.

Disruption of trade through the Strait of Hormuz impacting global energy supply has also weighed on overall market sentiment and lent support to the safe-haven greenback.

Iran said it plans to keep the Strait of Hormuz closed until the US blockades is removed. While US President Donald Trump said the ceasefire with Iran had been extended “indefinitely,” the ceasefire between Israel and Lebanon has been extended by three weeks. An overall improvement in market sentiment supported the Australian dollar.

The Aussie also responded to speculations of the Reserve Bank of Australia hiking interest rates next month due to high inflation, triggered by rising oil prices. The speculations were supported by strength in the labour market.

Data released on Thursday showed that the S&P Global Australia manufacturing PMI rose to 51.0 in April from 49.8 in the previous month. Australia’s services PMI business activity index surged to 50.3 in April from the previous month’s 46.3, which was the lowest reading since November 2023.

Australia’s S&P Global composite PMI climbed to 50.1 in April from 46.6 in March, indicating a marginal return to growth.

Australia and Japan are expected to sign an economic security agreement early next month, which would include energy, food, rare earths, and other critical commodities, and provide further support to the commodity-linked AUD.

Weakness in the US dollar lent further support to the AUD/USD pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged lower to 98.80 this morning.

The AUD/USD forex pair gained around 0.1% to 0.7131, while the S&P/ASX 200 slipped 0.27% to 8,769.70 this morning.

What to watch: Investors will keep an eye on the US-Iran talks.

Data on key inflation, due to be released next week on Wednesday, will remain in focus. Australia’s annual inflation rate, which fell to 3.7% in February, is expected to rise to 4.5% in March. Quarterly inflation rate in Australia, which rose to 3.6% in the fourth quarter from 3.2% in the third quarter, is expected to accelerate to 4.1% in the first quarter.

The markets today

Intel in focus today following the release of quarterly results

Context: Shares of Intel rose sharply in after-hours trading on Thursday following the release of the company’s stronger-than-expected results for the first quarter.

Details: Intel reported quarterly revenues of $13.58 billion, topping consensus estimates of $12.42 billion. Earnings came in at 29 cents per share, surpassing Wall Street expectations of 1 cent per share.

Revenue in the data center and AI segment came in at $5.1 billion, above market estimates of $4.41 billion.

CEO Lip-Bu Tan’s revival plan to boost Intel’s balance sheet through layoffs and asset sales provided support to the company’s overall results.

Intel also received large investments and signed agreements with Nvidia and the US government, reviving market confidence in the company’s growth.

“The next wave of AI will bring intelligence closer to the end user, moving from foundational models to inference to agentic. This shift is significantly increasing the need for Intel’s CPUs and wafer and advanced packaging offerings,” Tan said.

Intel guided to adjusted earnings of 20 cents per share for the second quarter, higher than market estimates of 9 cents per share. The company also guided to revenue of $13.8-$14.8 billion, compared to market expectations of $13.07 billion.

How shares responded: Intel’s shares jumped 20% to $80.10 in extended trading hours on Thursday following the release of quarterly results. The stock has surged around 52% over the past month.

What to watch: Investors will continue monitoring Intel’s ability to meet demand, which would depend on its ability to manufacture processors at a large scale and avoid supply issues.

Rising competition in the CPU market will also remain in focus, with rivals like AMD and Nvidia, also eyeing the space.

Other Markets: European indices closed mixed on Thursday, with the FTSE 100 and DAX 40 down by 0.19% and 0.16%, respectively, and the CAC 40 and STOXX Europe 600 Index up by 0.87% and 0.05%, respectively.

The news shaping the markets

Ukraine’s foreign minister Andrii Sybiha said that Kyiv is now in the “the strongest” frontline position in a year. The news sent the USD/RUB pair higher in forex trading this morning.

Japan’s annual inflation rate accelerated to 1.5% in March from the previous month’s four-year low reading of 1.3%, lending support to the USD/JPY forex pair.

Singapore’s private home prices rose by 0.9% in the first quarter. This acceleration from 0.6% in the previous quarter sent the USD/SGD pair slightly higher in forex trading this morning.

Argentina’s retail sales climbed 17.9% year-over-year to ARS 495,867 million in February, easing from a 20.7% surge in the previous month, which lent support to the USD/ARS forex pair.

UK’s GfK consumer confidence index fell four points to -25 in April, missing market estimates of -24. This being the weakest reading since October 2023 sent the GBP/USD pair lower in forex trading this morning.

What else to watch today

Germany’s Ifo business climate (1200 UAE Time), Ifo current conditions (1200 UAE Time) and Ifo expectations (1200 UAE Time), Russia’s interest rate decision (1430 UAE Time), Brazil’s FGV consumer confidence (1500 UAE Time), current account (1530 UAE Time) and foreign direct investment (1530 UAE Time), India’s foreign exchange reserves (1530 UAE Time), Turkey’s foreign exchange reserves (1530 UAE Time), Mexico’s economic activity (1600 UAE Time) and unemployment rate (1600 UAE Time), Canada’s retail sales (1630 UAE Time), wholesale sales (1630 UAE Time) and budget balance (1900 UAE Time), as well as US Michigan consumer sentiment (1800 UAE Time), Michigan inflation expectations (1800 UAE Time), Baker Hughes oil rig count (2100 UAE Time) and Baker Hughes total rigs count (2100 UAE Time).