Americas FX Morning Bullets 21 May 2026

Research evidence excerpt

Americas FX Morning Bullets 21 May 2026

Currencies ● Global

21 May 2026

The AUD is an underperformer in G10 FX this morning after soft Australian labour market

data. The unemployment rate surprised at 4.5% against consensus expectations for an

unchanged print of 4.3%, driven by job losses of 19k versus expectations for gains of 15k.

According to our economists, annual employment saw its growth fall to 0.9% y-o-y, the lowest

rate since March 2021 (see Australian labour market, 21 May). A tight labour market had been a

principal reason for the inflationary resurgence in Australia before the conflict in the Middle East

began. With the unemployment rate now above the RBA’s baseline forecasts for the rest of the

year, this has removed c7bps of pricing for the terminal rate of the central bank’s hiking cycle in

Cash Rate Futures. In turn, this weighed on the currency this morning, although it has shown

signs of bottoming out due to elements of continued risk-on tone in global equity markets. We

still prefer the AUD in G10 FX and believe the overall magnitude of rises in both the Cash Rate

and the ACGB curve so far this year continue to lean supportive for the currency.

Late yesterday Moody’s cut Mexico’s credit rating one notch to Baa3, with a stable

outlook. The cut still means Mexico retains its investment grade status, but by Moody’s

measure is now just one notch above junk. Moody’s cited a sustained deterioration in Mexico’s

fiscal position in recent years, which they expect to continue amid rigid spending, a narrow

revenue base, the need to support Pemex and relatively low growth. Moody's now joins Fitch as

holding Mexico at the lowest investment grade rating, with S&P holding the country two notches

above (though S&P recently lowered Mexico’s outlook to negative).