Australian Dollar
A dovish inflation forecast from the Reserve Bank of Australia (RBA) caused the Australian Dollar to tumble on Friday. In its latest Statement on Monetary Policy, the RBA predicted that inflation would now take until the middle of 2017 to meet targets. This revelation caused market expectations of further cuts to the already historically low official cash rate to shoot up. The futures market shows a 33% chance of a cut in June, while the odds of further easing in August are currently at 79%.
The news caused the Australian Dollar to plummet against the majors, with the positive AiG Performance of Construction Index result completely overlooked. The index, which had been showing a strong contraction reading of 45.2 leapt up into growth territory with a score of 50.8 for April.
Movement for the ‘Aussie’ during the beginning week is most likely to be triggered by Chinese data, with tomorrow yielding figures for aggregate financing, total new Yuan loans and the latest Consumer Price Index on Tuesday. The first impactful Australian data is released on Wednesday; the Westpac Consumer Confidence index for May, as well as home loans and investment lending figures for March.
Sterling
The AUD/GBP exchange rate tumbled on Friday, despite a lack of impactful domestic data and news hampering Pound Sterling on Friday. The fallout from the week’s disastrous PMIs continued to weigh on sentiment, while the local elections dominated the media.
On Thursday the Bank of England (BoE) makes its next interest rate decision. The result will likely be another rate hold, but traders will be paying close attention to Governor Mark Carney’s subsequent press conference. As the Governor tries to negotiate around the issue of the ‘Brexit’ referendum, there is a feeling that the things he doesn’t say could be as telling as his actual comments.
Euro
The Euro managed to remain largely impervious to the weakening effect of some disappointing PMIs on Friday, instead strengthening against many of the majors. Germany’s retail and construction PMIs showed a considerable slowdown in growth, dropping from 54.1 to 51.0 and 55.8 to 53.4 respectively. Meanwhile, retail activity in the Eurozone overall continued to decline at an increased pace, with the PMI’s contraction score of 49.2 dropping to 47.9.
There is plenty of Eurozone data due out this week, starting today with German factory orders figures for March and the Eurozone Sentix Investor Confidence results for May. Traders will be looking ahead to Friday’s preliminary first-quarter gross domestic product figures for Germany and the Eurozone.
US Dollar
The US Dollar was mostly strong on Friday, despite a below-forecast printing for the Non-Farm Payrolls report. Disappointing forecasts of 200,000 new jobs, the actual figure of 160,000 still revealed a respectable growth in the jobs market and, combined with level unemployment at 5%, helped to boost confidence in the US economy.
The US data docket contains many medium-impact releases this week, including tomorrow’s Labor Market Conditions Change Index for April and Wednesday’s wholesale inventories and mortgage application figures. Investors will have to wait until Friday for the week’s headline data, however; the Advance Retail Sales figures.
Canadian Dollar
The Canadian Dollar’s mixed fortunes were little-changed on Friday after the release of the week’s high profile data. In the end, it was the New Change in Employment figure for April which disappointed, registering a fall in employment of -2,100, despite a forecast rise of 5,000. Unemployment, which was expected to rise ten basis points, remained level at 7.1%.
Today’s housing starts figure could provoke some movement for the ‘Loonie’.
New Zealand Dollar
Falling stocks and oil prices, combined with the weakness in the Australian Dollar, doused risk appetite on Friday. As a result, the New Zealand Dollar suffered from falling demand, plummeting against the majors. The only gain for the ‘Kiwi’ was a bullish rise against the floundering Australian Dollar.
As with the Australian Dollar, the New Zealand Dollar could find itself moved by this week’s high profile Chinese data, with the Consumer Price Index likely to create more market volatility than New Zealand’s low impact data tomorrow.
Data Released
May 9th 22.15 CAD Housing Starts (APR)
May 10th 11.30 CNY Consumer Price Index (YoY) (APR)
May 11th 10.30 AUD Westpac Consumer Conf Index (MAY)
May 10th 08.45 NZD NZ Card Spending (MoM) (APR)
May 12th 21.00 GBP Bank of England Rate Decision (MAY 12 0.50%
May 12th 21.00 GBP Bank of England Inflation Report
May 13th 16.00 EUR German Gross Domestic Product w.d.a. (YoY) (1Q P)
May 13th 19.00 EUR Eurozone Gross Domestic Product s.a. (YoY) (1Q P)
May 13th 22.30 USD Advance Retail Sales (APR)