Australian Dollar
The Australian Dollar was facing severe headwinds yesterday, pushing it deep into negative territory against its peers. After trending bullishly on the back of Tuesday’s Reserve Bank of Australia (RBA) minutes, the ‘Aussie’ was initially softened yesterday by correctional trading as investors realised their gains. On top of this, hawkish comments from the US Federal Reserve boosted safe-haven demand, which was strengthened by falling commodity prices.
Data released earlier in the session didn’t provide any support for the Australian Dollar, with wage growth slowing in a manner suggestive of weak inflationary pressure. This, in contrast to the less dovish than expected minutes from the RBA, would support another interest rate cut.
Today’s unemployment figure is likely to weaken the ‘Aussie’ further, having been forecast to show a rise in joblessness from 5.7% to 5.8%.
Sterling
The Australian Dollar to Pound Sterling exchange rate saw significant volatility yesterday. ‘Aussie’ weakness initially allowed the Pound to advance, before the latest UK data undermined GBP. Employment may have hit an all-time high, but average weekly earnings excluding bonuses defied forecasts of a marginal rise in order to tick gradually lower. The Bank of England (BoE) keeps a close eye on wage growth, as it hints at inflationary pressures, so a poor reading further delayed expectations of when the Monetary Policy Committee (MPC) would hike rates.
However, Sterling was tipped into a bullish advance after the results of the latest Ipsos MORI poll were released. According to the survey, 55% of UK voters support the ‘Remain’ campaign, compared to 37% supporting the ‘Leave’ camp. As a result, AUD/GBP tumbled over -1.6%, falling to its lowest level in over twelve months.
UK retail sales could help keep the Pound strong today, as the monthly and annual results are expected to print positively.
Euro
The Euro was weak yesterday thanks to continued monthly deflation and slowing annual CPI growth. Also softening appetite for the common currency were concerns over Spain’s debt, following the news that the country’s debt levels had surpassed the value of its economy, standing at €1.09 trillion compared to GDP of €1.08 trillion. Spain’s acting Prime Minister has said he is considering cutting taxes further, despite the fact that this could further increase a deficit which has already breached EU rules and has the European Commission considering levelling sanctions against the country.
Low-impact Eurozone current account and construction output figures, as well as the more high-profile account of the latest European Central Bank (ECB) policy meeting, could move the Euro today.
US Dollar
A confident outlook on US monetary policy from several Fed officials kept the US Dollar trending bullishly yesterday. John Williams and Dennis Lockhart both suggested that there could be between two and three interest rate hikes during the remainder of 2016. The policymakers also claimed that the June policy meeting was still a ‘live’ affair in terms of monetary tightening. Additionally, Robert Kaplan claimed he may push for a rate hike in June or July.
The US Dollar approached the release of April’s Federal Open Market Committee (FOMC) minutes on strong form, with the latest figures showing a -1.6% drop in mortgage applications doing little to soften the ‘Greenback’. Only Pound Sterling was able to hold positive territory against the US Dollar.
Jobless claims figures aren’t due until the end of the today, so the fallout from the minutes, as well as the ‘Aussie’s performance after the unemployment results, will determine US Dollar trends for most of the day.
Canadian Dollar
A report calculating the cost of the recent wildfires in Alberta weakened the Canadian Dollar yesterday, although the ‘Loonie’ managed to make strong gains verses the ‘Aussie’. Economists calculated that the cost of lost oil production so far to Canada was nearly -CA$1 trillion, with production cut by -1.2 million barrels per day. The cost is the equivalent of 0.33% of the projected GDP for Alberta over the coming year and 0.06% of Canada’s total GBP.
The only data for Canada today is the wholesale sales figure for March, which is expected to show a slowdown in the rate of decline from -2.2% to -0.5%.
New Zealand Dollar
The New Zealand Dollar was weakened by yesterday’s low-risk appetite, with little domestic data to provide support. Produce prices for inputs and outputs continued to decline quarter-on-quarter in the first three months of 2016, albeit at a slower pace. The continuing debate regarding whether or not the Reserve Bank of New Zealand (RBNZ) should lower the inflation target, plus rising worries about the level of debt among New Zealand households further contributed to the downward pressures.
Job advertisements and consumer confidence data is due out today.
Data Released
May 19th 11.30 AUD Unemployment Rate (APR) 5.8%
May 19th 11.30 AUD Employment Change (APR) 12.0k
May 19th 18.30 GBP Retail Sales (YoY) (APR) 2.0%
May 19th 21.30 EUR ECB account of the monetary policy meeting
May 19th 22.30 USD Initial Jobless Claims (MAY 14) 275k
May 19th 22.30 USD Continuing Claims (MAY 7)