Australian Dollar
With no domestic data released on Friday, Australian Dollar movement was dictated by market sentiment. Risk-appetite was recovering after the heightened chance of monetary tightening from the Fed caused a significant decline in commodity indexes and stocks, giving the ‘Aussie’ a minor boost. However, a warning from the Australian Treasury that the government would need to either cut spending further or raise taxes weighed on gains.
The most impactful development for Australia this week is likely to be a speech by Reserve Bank of Australia (RBA) Governor Glenn Stevens. Investors lowered their rate cut expectations after the latest RBA meeting minutes showed that the recent easing had been much debated. However, the Australian Dollar could fall dramatically if Stevens suggests that further easing is still on the table.
Sterling
After tumbling to its lowest point in over three months, the Australian Dollar was able to make a tentative recovery against the Pound on Friday. Positive ‘Brexit’ referendum polls and strong retail sales had tipped the Australian Dollar into a two-day decline, but the resulting profit-taking ended the deprecation as the weekend approached.
Trader appetite for the Pound was also cooled considerably by comments from Bank of England (BoE) policymaker Gertjan Vlieghe. One of the things keeping Sterling weak recently has been speculation that the BoE may be forced to cut interest rates in the event of a ‘Brexit’. However, Vlieghe claimed that a rate cut could be necessary regardless of the outcome of the referendum.
Public borrowing figures are due out on Tuesday, but the most impactful UK data of the week will be the preliminary Gross Domestic Product figures for the first quarter of 2016.
Euro
Rate cut speculation was also affecting the Euro on Friday, although in this case bets of looser policy were falling. The common currency appreciated after European Central Bank (ECB) member Benoit Coeure said that there currently weren’t any plans to make further cuts to the already negative deposit rate. Two other Eurozone central bankers, who are also policymakers with the ECB, noted that monetary policy should remain as it is for the time being in order to assess the effects on the market.
Also boosting sentiment were comments from Pierre Moscovici, the European Commissioner for Economic Affairs, expressing his confidence that a deal regarding Greek debt relief was ‘very close’ to being made.
There is a busy week ahead for Eurozone data, starting today with French, German and Eurozone manufacturing and composite PMIs.
US Dollar
US data late on Thursday showed that the number of continuing jobless claims ticked slightly lower in May, although initial jobless claims didn’t drop by quite as much as expected. The Philadelphia Fed manufacturing index showed an accelerated contraction, falling from -1.6 to -1.8, while the Fed’s Stanley Fischer hinted that he would like to see stronger economic growth before considering a rate hike. While not overwhelmingly negative, the data – along with profit-taking – helped to cool US Dollar appetite.
There is plenty over the coming week to create volatility for not just the US Dollar, but for global markets. Multiple Fed officials are speaking during the week, giving investors further chance to price in rate hike bets. The commentary will be accompanied by two key data releases which will either undermine or bolster the likelihood of Fed tightening. Strong printings from Thursday’s durable goods orders and Friday’s Q1 gross domestic product will likely tip the US Dollar into a bullish run.
Canadian Dollar
Some long-awaited good news for Canada failed to distract from the continuing disruption of the wildfires ravaging the country. The core inflation reading accelerated to 2.2% on the year, beating predictions of a decline to 2%, while slowing less-than-expected on the month to 0.2%. However, with the exception of small gains against the weak Pound, the ‘Loonie’ sank into negative territory.
Thursday will be a key day for the Canadian Dollar, with the Bank of Canada (BOC) announcing its latest interest rate decision.
New Zealand Dollar
Strong migration and spending figures helped the New Zealand Dollar make small gains on Friday. Emigration is a key economic driver for New Zealand, so the rise in net migration from 5,330 to 5,520 helped the ‘Kiwi’ advance. Other positive data included a 2.5% monthly rise in credit card spending during April, with year-on-year (YoY) spending accelerating to 9.1%.
The only New Zealand data due out this week is Wednesday’s trade figures.
Data Released
May 23rd 17.30 EUR Markit/BME Germany Composite PMI (MAY P) 53.8
May 23rd 18.00 EUR Markit Eurozone Composite PMI (MAY P) 53.2
May 24th 13.05 AUD RBA’s Stevens Speech in Sydney
May 24th 18.30 GBP Public Sector Net Borrowing (Pounds) (APR)
May 25th 08.45 NZD Trade Balance (New Zealand dollars) (APR)
May 26th 00.00 CAD Bank of Canada Rate Decision (MAY 25)
May 26th 18.30 GBP Gross Domestic Product (YoY) (1Q P)
May 26th 22.30 USD Durable Goods Orders (APR P) 0.8%
May 27th 22.30 USD Gross Domestic Product (Annualized) (1Q S)