AUD extended its gains last week, rising 2.5% through the week againstthe US dollar, with the AUD/NZD cross climbed to 1.219. The localcurrency was heavily supported by robust labour force data, with AUDrising 0.9% following the release. AUD did retrace later in the weekfollowing reports that a final peace deal between the US and Iran couldtake six months. However, the Aussie found renewed strength on Fridayevening as the Strait of Hormuz was reopened. However, this was shortlived, as Iran announced over the weekend that the Strait had beenclosed again, due to the ongoing US blockade. The Aussie opened lowerthis morning off the back of this news.Locally, focus was entirely on the March labour force data, which came inbroadly in line with expectations. The unemployment rate held steady at4.3%, with employment rising by 18k. Interestingly, FT employmentsurged by 52.5k through the month, fully offsetting a 34.7k fall in PTroles. Indeed, post the release of the data, markets were pricing a 72%probability of a rate hike next month. This aligns with our view that theRBA will deliver one final hike to 4.35% at its next meeting, before holdingrates steady for the remainder of the year to navigate the challenges ofelevated inflation and weaker economic growth.Despite the robust jobs data, forward-looking sentiment surveys painteda bleak picture of the domestic economy. WMI consumer sentiment fell12.5% in April - the largest monthly decline since COVID-19. Additionally,NAB business confidence plummeted from -1 to -29 points. That said,the fall in business conditions was more tame, with conditions easing to5.7 (from 6.4). However, if confidence remains weak this will likely be adrag on broader business conditions in the coming months.Looking ahead, locally the focus will be on April PMI data due out onThursday. That said, the key focus will be on this week’s expiration of theUS-Iran ceasefire agreement. While an extension of the ceasefire is likelyalready priced in, a more definitive resolution would provide a largerboost for the currency. Nevertheless, the Aussie continues to remainshighly sensitive to breaking geopolitical headlines.
