Australian Dollar
Continuing weakness from the Reserve Bank of Australia’s (RBA) shock interest rate cut was still visible in the Australian Dollar exchange rates yesterday. Apart from a bullish advance against the Canadian Dollar, the ‘Aussie’ either remained within opening levels or fell into negative territory verses the other majors. Falling commodity prices, speculation regarding the upcoming election and strong data from the US all helped dampen sentiment.
Today’s data includes trade balance and retail sales figures. The trade deficit is predicted to have shrunk by around -AU$0.5 billion in March, while retail sales are expected to show growth of 0.3% on the month and 0.7% on the year.
Sterling
Pound Sterling was one of the few currencies the Australian Dollar managed to advance against yesterday, although AUD/GBP remained close to opening levels. The Pound was weakened by April’s UK construction PMI, which revealed that the construction industry expansion had slowed significantly on the month. The index, expected to drop just -0.2 points to 54, slumped to 52, adding to the economic worries sparked by Tuesday’s manufacturing PMI.
The pressure is now on today’s services PMI to print well above expectations if the UK’s strong economic growth is to retain its current momentum. However, the index is forecast to show a -0.2 point dip; given the performance of the recent two PMIs it is more likely that the services reading will undercut forecasts rather than overshoot them.
Euro
The Euro was remained mostly impervious to the weakening effect of poor retail sales figures for March yesterday. Sales fell -0.5% on the month, eclipsing the expected decline of -0.1%, while on the year growth slumped from 2.7% to 2.1%. The results had some traders and economists questioning whether they had celebrated the strength of the Eurozone economy too soon after last week’s positive GDP results.
The common currency received some support from the day’s Markit PMI releases. The composite indexes for the Eurozone and Germany both showed solid expansion, even if the German index edged down -0.2 points.
The only data for the Eurozone today is the European Central Bank’s (ECB) Economic Bulletin and the Eurozone retail PMI.
US Dollar
The US finally released a run of positive data yesterday, with the latest PMIs all improving or bettering their forecasts. The Markit services PMI unexpectedly increased, rising from 52.1 to 52.8, while the Composite increased to 52.4 from 51.7. The headline figure – the ISM Non-Manufacturing PMI – performed better-than-expected, climbing to 55.7 from 54.5, defying forecasts of a more modest rise to 54.7.
The bulk of the US data due today has already been released, with US Dollar movement likely to remain driven by reactions to the ISM Non-Manufacturing result. The Fed’s Neel Kashkari is due to make a public appearance this morning, while unemployment data will be released late this evening.
Canadian Dollar
A widening trade shortfall severely weakened the Canadian Dollar yesterday, with the deficit hitting a record high. Canada’s International Merchandise Trade deficit grew from -CA$1.91 billion to -CA$3.41 billion, despite predictions of a narrowing to -CA$1.4 billion. To add to the bad news, February’s trade figure was revised down, taking the deficit from -CA$1.91 billion to -CA$2.47 billion. The trade surplus with the US – which is responsible for roughly 75% of Canada’s exports, slid to CA$1.53 billion; the smallest reading since late 1993.
The sole Canadian data set for release today is the on the month building permits figure for March. This is expected to show that the number of building permits granted dropped -4.4% compared to the previous month, which experienced a 15.5% surge.
New Zealand Dollar
A worse-than-expected unemployment figure for the first quarter of 2016 weakened the New Zealand Dollar yesterday. The rate of joblessness had been expected to creep up to 5.5%, although the actual result came in at 5.7% and the previous reading was revised up to 5.4%. In other disappointing news, average hourly earnings for the first three months of the year only grew by 0.3%, defying forecasts of a rise from 0.2% to 0.5%.
There is no data for New Zealand to be published today. However, the Caixin services and composite PMIs for China could provide movement if they show a reading which significantly eases or heightens fears over the Chinese economy.
Data Released
May 5th 11.30 AUD Trade Balance (Australian dollar) (MAR) -2900m
May 5th 11.30 AUD Retail Sales s.a. (MoM) (MAR) 0.3%
May 5th 18.30 GBP Markit/CIPS UK Services PMI (APR) 53.5
May 5th 18.30 GBP Markit/CIPS UK Composite PMI (APR) 53.2
May 5th 22.30 CAD Building Permits (MoM) (MAR) -4.4%
May 5th 22.30 USD Initial Jobless Claims (APR 30)
May 5th 22.30 USD Continuing Claims (APR 23)