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James Hyerczyk

The Australian and New Zealand Dollars are trading slightly lower on Thursday after giving up earlier gains. The price action suggests investors may be lightening up on the long side as the two currencies approach multi-week highs.

The Australian Dollar hit a seven week high at .6570 in a sign of improving risk sentiment among some investors. The Aussie has also benefited from the country’s success among some investors.

The New Zealand Dollar also traded near at six-week high as economic activity returns following the end of one of the world’s strictest lockdowns related to the coronavirus.

At 08:39 GMT, the AUD/USD is trading .6540, down 0.0014 or -0.21% and the NZD/USD is at .6118, down 0.0014 or -0.23%.

Australian Economic News

Earlier in the session, a report showed that quarterly Import Prices fell 1.0% and Private Sector Credit rose 1.1%.

Australian business borrowing surged by the most in three decades in March as firms stockpiled cash to see them through a widespread economic lockdown that is only now being eased slightly in some states.

Figures from the Reserve Bank of Australia (RBA) on Thursday showed total credit outstanding to business jumped 2.9% or A$29 billion ($19 billion) in March from a month earlier, easily the biggest rise since 1988.

Business credit rose to A$1.02 trillion ($668.30 billion, the first time ever above the trillion mark. That was enough to lift total private credit outstanding by 1.1% in March, itself the largest increase since the global financial crisis.

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China Manufacturing Sector Dips on Slowing Global Demand

China’s manufacturing sector has been hit by slowing export demand due to the economic impact from the global coronavirus pandemic even as factories in the world’s second-largest economy resumed production, two sets of April data released on Thursday showed.

Despite the setback, investors shrugged off the news as it was likely already priced into the market. When looking at these reports, remember that bad numbers are expected so better-than-forecast results will generate a positive response from the markets. The bad news is more than likely baked into the markets.

Results of a private survey, the Caixin/Markit manufacturing Purchasing Manager’s Index (PMI), for April was 49.4 – in contractionary territory. Analysts polled by Reuters had expected the Caixin/Markit manufacturing PMI to come in at 50.3, compared with 50.1 in March.

Meanwhile, China’s National Bureau of Statistics said manufacturing activity in the country expanded slightly, reporting official manufacturing PMI of 50.8 for the month of April, as compared to 52.0 in March. Analysts polled by Reuters had expected official manufacturing PMI to come in at 51.0 in April.

Daily Forecast

The Aussie begins Thursday’s session with strong upside momentum after posting six consecutive higher closes. However, it’s also nearing a major resistance area that could encourage some light profit-taking.

AUD/USD and NZD/USD traders will also be monitoring investor demand for risk. Furthermore, despite the easing of some restrictions, the two countries are not out of the woods yet when it comes to the coronavirus. Investors will be paying close attention to the rate of infection numbers to see if the two countries can move forward and open more businesses, or if they need to tighten up restrictions once again.

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