Australian Dollar
The markets were sent reeling yesterday after the Reserve Bank of Australia (RBA) unexpectedly cut the official cash rate (OCR) for the first time in 12 months. The new OCR of 1.75% is a fresh historical low for Australia and is the RBA’s response to the latest poor inflation rate. ANZ is the only one of Australia’s four major banks that announced it would not pass on the full saving – which equates to AU$43 per month on an average 25 year mortgage for AU$300,000 – to its customers, citing higher funding costs.
The only Australian data due out today is the AiG Performance of Service Index, although after today’s shock even a positive result may not be able to lift the ‘Aussie’ out of its current trough.
Sterling
A shock drop in UK manufacturing activity during April wasn’t enough to lift the AUD/GBP exchange rate out of negative territory. Pound Sterling was pushed into the negative against the majority of currencies, however, despite a strong start to the day. The cause of the tumble was the latest Markit manufacturing PMI, which unexpectedly dropped from 51.2 to 49.2 on a seasonally-adjusted basis last month. Many industry experts attributed the reading – which showed that activity in the sector had declined – at least partly to the uncertainty of the approaching ‘Brexit’ referendum.
The sole UK data set for release today is the Markit/CIPS construction PMI. The index is expected to show a mild slowdown in sector expansion, although after today’s manufacturing PMI shock, markets are now braced for a worse result.
Euro
The Euro was trending bullishly against the Australian Dollar yesterday, extending gains of over 2.1%. European Central Bank (ECB) member Sabine Lautenschläeger insisted that the ECB had more tools available in order to boost inflation, but expressed a preference to wait to see the effects of March’s latest round of easing. Meanwhile, Benoît Cœuré has said that the ECB would not cut the negative deposit rate further. Markets seemed to interpret the comments of the two ECB members as suggesting there will not be any additional easing in the near future, as the Euro trended bullishly against several of its peers.
As well as the Eurozone retail sales figures for March, the finalised composite and services PMIs for Germany and the Eurozone as a whole are due for publication today.
US Dollar
A worse-than-expected slowdown in the ISM manufacturing index weakened the US Dollar during yesterday’s session. The industry was expected to slow marginally in April, but the index dropped -1 point rather than -0.4 points to hit 50.8. Further dwindling confidence in the US economy was still not enough to prevent the Australian Dollar from making bearish losses, with the AUD/USD exchange rate sliding -1.9%. The US Dollar later managed to enter positive territory against many of the majors, helped by San Francisco Fed President John Williams, who once again stated that he believed the US economy was strong enough to handle higher borrowing costs.
Several low and medium-importance data releases are due out today for the US, including the ADP Employment Change figure for April and the trade balance figure for March.
Canadian Dollar
A lack of domestic data or news kept the Canadian Dollar at the mercy of the crude oil markets yesterday. After reaching around US$47 before the weekend, crude oil was retreating again yesterday, with WTI Crude trading around US$44.50 per barrel and Brent Crude slipping below US$45.70.
The only data due for Canada today is the International Merchandise Trade figure for March, although this low-impact release is unlikely to provide much movement for the ‘Loonie’.
New Zealand Dollar
The surprise RBA rate cut served to weaken risk appetite yesterday, causing the New Zealand Dollar to fall. Weakness in the ‘Kiwi’ was further compounded by a drop in dairy prices at the latest GlobalDairyTrade auction. The GDT Price Index dropped -1.4% to US$2,203 per metric tonne. The New Zealand Dollar ended yesterday’s session almost as deep in negative territory as the Australian Dollar, although it was still advancing bullishly against its antipodean cousin.
Today sees two high impact releases for New Zealand; the unemployment rate is expected to have crept up from 5.3% to 5.5% during the first quarter, while employment change is predicted to have remained steady at 1.3%.
Data Released
May 3rd 08.45 NZD Unemployment Rate (1Q) 5.5%
May 3rd 08.45 NZD Employment Change (YoY) (1Q) 1.3%
May 3rd 09.30 AUD AiG Performance of Service Index (APR)
May 3rd 18.30 GBP Markit/CIPS UK Construction PMI (APR) 54.0
May 3rd 19.00 EUR Eurozone Retail Sales (YoY) (MAR) 2.6%
May 3rd 22.15 USD ADP Employment Change (APR) 195k
May 3rd 22.30 USD Trade Balance (MAR) -$41.1b
May 3rd 22.30 CAD International Merchandise Trade (Canadian dollar) (MAR) -1.40b