Forexpros – The Australian dollar ended the week lower against its U.S. counterpart on Friday, but remained supported as market sentiment slightly improved after euro zone finance ministers agreed to strengthen the region’s debt firewall.
AUD/USD hit 1.0304 on Thursday, the pair’s lowest since January 16; the pair subsequently consolidated at 1.0344 by close of trade on Friday, declining 1.12% over the week.
The pair is likely to find support at 1.0262, the low of January 11 and resistance at 1.0434, the high of January 19.
Euro zone finance ministers agreed on Friday to boost the bloc’s bailout lending limit to EUR800 billion, in order to combat the threat of sovereign debt contagion to larger economies such as Italy and Spain.
The firewall is to be comprised of EUR500 billion from the European Stability Mechanism, which will come in to effect from July, another EUR200 billion already committed in loans to Greece, Ireland and Portugal and EUR100 billion in bilateral loans and European Union funds.
Sentiment was also lifted after Spain’s government announced EUR27 billion of cuts in the most austere budget in 30 years, amid concerns that the country may be the next to need a bailout.
In the U.S., data on Friday showed that consumer spending posted its biggest jump in seven months in February, while an index of consumer sentiment rose more-than-expected in March.
The Commerce Department reported that personal spending rose 0.8% in February, above expectations for a 0.6% gain, although incomes rose only 0.2%, a little less than expected.
The Thomson Reuters/University of Michigan’s consumer sentiment index for March rose to 76.2, the highest in over a year and above expectations for a reading of 75.1.
The Australian dollar remained under pressure from concerns that commodity prices could fall amid indications that the pace of economic growth in China is slackening.
China is Australia’s largest export destination.
Meanwhile, the Reserve Bank of Australia said that private sector credit rose more-than-expected in March, ticking up 0.4% after a 0.2% increase the previous month. Analysts had expected private sector credit to rise 0.3% in March.
The report came after industry data showing that new home sales in Australia rose 3% in February after a 7.3% decline the previous month.
The Aussie eased off a two-and-a-half month low against the greenback on Thursday after the Department of Labor said the number of individuals filing for initial jobless benefits in the U.S. fell by 5,000 to a seasonally adjusted 359,000 last week, disappointing expectations for a decline of 14,000 to 350,000.
The previous week’s figure was revised up to 364,000 from 348,000.
Jobless claims have remained below 400,000, a level historically associated with an improving labor market, in 20 of the past 22 weeks.
A separate report showed that the U.S. economy grew by 0.3% during the final three months of 2011, unchanged from a preliminary estimate.
In the week ahead, investors will be focusing on Monday’s U.S. manufacturing data, as well as Friday’s report on non-farm payrolls.
Meanwhile, markets will also be eyeing the release of the Reserve Bank of Australia’s benchmark interest rate.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, April 2
Australia is to release official data on building approvals, an excellent gauge of future construction activity.
Later in the day, the U.S. is to release a report by the Institute of Supply Management on manufacturing activity.
Tuesday, April 3
The Reserve Bank of Australia is to announce its benchmark interest rate. The bank’s rate statement will be closely watched as it contains important insights into economic conditions from the bank’s perspective.
Australia is also to produce official data on retail sales, while Japan is to produce government data on average cash earnings.
The U.S. is to produce official data on factory orders, a key indicator of production. Later Tuesday, the Federal Reserve is to release the minutes of its most recent policy meeting.
Wednesday, April 4
Australia is to produce industry data on service sector activity as well as official data on the trade balance, the difference in value between imported and exported goods and services.
The U.S. is to produce industry data on non-farm employment change, as well as an ISM report on service sector activity and government data on crude oil stockpiles. Later in the day, U.S. Treasury Secretary Timothy Geithner is due to speak.
Thursday, April 5
The U.S. is to publish government data on unemployment claims, a leading indicator of economic health.
Friday, April 6
Markets in Australia are to remain closed for national holidays.
The U.S. is to round up the week with government data on non-farm employment change, followed by data on the unemployment rate. The country is also to release a government report on average hourly earnings, a leading indicator of consumer inflation.
Forexpros
