Australian Dollar
Yesterday’s early release of the US Federal Open Market Committee (FOMC) meeting minutes caused waves in the market and generated severe headwinds for the Australian Dollar. Renewed rate hike bets put the markets firmly in risk-off mode, with commodity indexes and stock markets sliding.
Additionally, Australia’s labour market data for April was disappointing. The employment change figure printed below expectations, but due to a drop in the participation rate, the unemployment rate did not increase from 5.7% to 5.8% as had been forecast. Because this was due to a technicality, rather than resilience in the labour market, the ‘Aussie’ continued to weaken.
There is no Australian data set for publication today.
Sterling
The Australian Dollar was pressured even lower by Pound Sterling yesterday after the release of strong UK retail sales figures for April. AUD/GBP plunged to a 13-and-a-half-week low after the Pound enjoyed its second bullish charge in as many days. Year-on-year (YoY) retail sales excluding fuel growth had been expected to slow from an upwardly revised 2.6% to 2%, but instead shot up 4.2%, while total sales smashed predictions of a slow from 3% to 2.5% by advancing 4.3%.
Today’s calendar only holds low impact data for the UK, although there is always the prospect of fresh referendum developments driving sentiment.
Euro
The Euro was softened yesterday by the prospect of widening policy divergence between the European Central Bank (ECB) and the US Federal Reserve. The latest ECB minutes highlighted the problems the central bank is facing in stimulating the economy, with policymakers urging Eurozone governments to increase the pace at which they implement structural reforms designed to support looser monetary policy. This suggested that, unless Eurozone countries quickly complied, there could be a need for further easing. Weakening Eurozone construction output for March also dampened sentiment.
The only data due out today is the low-impact Eurozone current account balance.
US Dollar
Yesterday saw uncertain trading for the US Dollar, as heightened expectations of monetary tightening clashed with market concerns over the potential impact of hiking so close to the volatile ‘Brexit’ referendum. The latest FOMC meeting minutes showed that the Fed was considering a rate hike in June, although it stressed that this would be data dependent. With more inflation and payrolls data between now and the June decision, there is still potential for the Fed’s outlook to become more dovish. Additionally, some economists have suggested the Fed was simply trying to remind markets of its potential and willingness to hike, rather than telegraphing a June increase.
All of today’s US data has already been released.
Canadian Dollar
With the bullish US Dollar undermining commodity prices, the Canadian Dollar was pressured lower after crude oil lost nearly -3% over the course of the session. The prospect of a rate hike would be bad for Canadian trade with the States, as the resulting US Dollar strength would make Canadian imports more expensive and exports less lucrative.
The Canadian Dollar is likely to remain muted today due to the approach of tonight’s retail sales and consumer price index figures for April.
New Zealand Dollar
Global risk-off appetite kept the New Zealand Dollar soft yesterday, with the only performance of note being bullish gains against the slumping Canadian Dollar. Low-impact data showed that job advertisement growth had slowed in April from 3.1% previously to 1.7%. Consumer confidence also declined -3.2%, taking the ANZ Consumer Confidence Index for May down to 116.2.
Today sees New Zealand migration and credit card spending figures released.
Data Released
May 20th 08.45 NZD Credit Card Spending (YoY) (APR)
May 20th 18.00 NZD Eurozone Current Account s.a. (Euros) (MAR)
May 20th 20.00 GBP CBI Trends Total Orders (MAY
May 20th 22.30 CAD Consumer Price Index (YoY) (APR) 1.7%
May 20th 22.30 CAD Bank Canada Consumer Price Index Core (YoY) (APR 2.0%