Australian Dollar
A strong US Dollar and warnings from Reserve Bank of Australia (RBA) Governor Glenn Stevens weighed heavily on the Australian Dollar yesterday. US rate hike bets rebounded, causing a sell-off in stocks, commodities and high-yield assets. Meanwhile, Stevens backed the Treasury’s pre-election budget forecast, but warned that it was based upon the assumption that everything goes to plan. He predicted that the triumphant party in the election would face ‘many years’ of effort to repair the budget.
Construction work figures for the first quarter of 2016 and skilled vacancies statistics for April are the only two data releases for Australia today.
Sterling
Not even a £4 billion overshoot in UK borrowing figures could prevent the Australian Dollar from plunging against Pound Sterling after the latest EU referendum poll. According to the survey, carried out by ORB for the Telegraph, the ‘Remain’ campaign had extended a lead of 13 points against the ‘Leave’ camp. Pound Sterling rocketed after the figures, which were especially cheering for investors as they showed that the strong lead was amongst voters who definitely intended to go to the polls. The results also showed that key ‘Brexit’ demographics, including Tory voters and the over 65s, were deserting the campaign and adopting a more pro-EU stance.
There is no UK data due out today.
Euro
A strengthening US Dollar pushed the Euro deep into negative territory yesterday, with mixed results from the day’s data slew failing to counter the depreciation. German GDP printed as expected, accelerating compared to the previous month’s figures, but still showing a significant decline on an annual basis. German private consumption, government spending, domestic demand and imports all disappointed forecasts. Despite a strong improvement in the German ZEW current condition survey, the economic sentiment index unexpectedly slid from 11.2 to 6.4. Further Euro weakness came from the fact investors were awaiting the results of the Eurogroup meeting to unlock the next tranche of Greek bailout funds.
Today sees the German GfK consumer confidence survey figures, as well as the IFO business climate, current assessment and expectations results, also for Germany.
US Dollar
Federal Reserve interest rate hike bets climbed again yesterday after weakening on Monday. The US Dollar trended bullishly against a number of the majors after the latest speech from a Fed official; this time Philadelphia Fed President Patrick Harker. According to Harker, the Federal Reserve should consider hiking interest rates between two and three times during the remainder of 2016. Harker also commented that, unless the remaining key data before the next meeting disappoints, he believed hiking rates in June would be ‘appropriate’.
Harker will be delivering another speech today and there will be multiple impactful data releases from the US, including the Markit preliminary services and composite PMIs.
Canadian Dollar
The Canadian Dollar managed to remain strong in the face of an advancing US Dollar, despite the prospect of tighter US monetary policy having downside risks for the Canadian economy. Investors were cheered by the news that Canadian oil returned to the international markets after being disrupted by the Alberta wildfires, strengthening the ‘Loonie’. A warning by several analysts that the Canadian economy may shrink in Q2 was largely ignored, judging by the Canadian Dollar’s bullish gains against several of the majors ahead of the Bank of Canada’s interest rate decision.
New Zealand Dollar
The New Zealand Dollar was weak overall yesterday, slumping against several of the majors as the advancing US Dollar sapped risk appetite. A lack of domestic data or news meant the ‘Kiwi’ faced no additional headwinds, allowing it to make a strong advance on the ‘Aussie’.
Figures today are expected to show that New Zealand’s year-to-date trade deficit increased in April, thanks to a forecast drop in the trade surplus.
Data Released
May 25th 08.45 NZD Trade Balance (New Zealand dollars) (APR) 25m
May 25th 08.45 NZD Balance (YTD) (New Zealand dollars) (APR) -3972m
May 25th 11.30 AUD Construction Work Done (1Q) -1.5%
May 25th 16.00 EUR German GfK Consumer Confidence Survey (JUN) 9.7
May 25th 22.30 USD Advance Goods Trade Balance (APR) -$60.0b