- ‘Aussie’ Softened by US Developments – USD GDP revised upwards
- AUD/GBP Falls on Rising UK Consumer Confidence – Sentiment improving
- AUD/EUR Holds Opening Levels – Euro investors still concerned over Greek debt relief
- New Zealand Dollar Soft – ‘Kiwi’ follows commodity prices in decline
Australian Dollar
Uncertainty gripped the currency markets on Friday, with the Australian Dollar languishing in negative territory against the majors, with the exception of solid gains against the Canadian Dollar. The day’s US developments dominated sentiment, with investors holding back until after the GDP release and a public appearance by Janet Yellen. On the domestic front, Fitch offered a warning to the Australian banking system. While noting that the huge market share of the big four offered them some protection from a hard landing in China, Fitch’s ratings director commented that ‘I wouldn’t call [the Australian banking system] safe and solid.’
This week’s biggest data release for Australia will be Wednesday’s GDP figure for the first quarter of 2016.
Sterling
The Australian Dollar traded below opening levels against Pound Sterling on Friday, with global investor caution and ‘Brexit’ uncertainties making it difficult for either currency to find particular support. UK consumer confidence figures showed that sentiment remained negative in May, although it had unexpectedly improved. There was plenty of referendum news, with the two camps arguing about immigration. The leaders of the G7 also issued a statement in which they warned of the dangers of the UK leaving the EU, while the Chair of the UK Statistics Authority delivered a direct rebuke to the ‘Leave’ campaign for continuing to use the ‘misleading’ claim that the UK sends £350 million to the EU every week.
Wednesday’s UK Markit manufacturing PMI for May is likely to cause significant volatility for Pound Sterling as the stricken manufacturing sector is of considerable concern to investors.
Euro
Market sentiment was the main driver of Euro movement on Friday, with a lack of particularly impactful domestic data giving the common currency nothing to support it. The potential for higher US interest rates continued to curb trader activity. Also weakening sentiment was a renewed concern over the issue of Greek debt relief. The International Monetary Fund (IMF) and Eurogroup creditors may have reached an accord, but by agreeing to delay debt relief decisions, many worried that they were simply kicking the can further down the road.
Today’s German consumer price index could boost the Euro if the figures print as expected, showing an end to deflation, although investors may remain discouraged by the overall low state of price growth in the Eurozone’s powerhouse economy, especially with an interest rate decision due from the European Central Bank (ECB) on Friday.
US Dollar
The US Dollar steadily advanced throughout the day, buoyed by expectations of a positive result from the second round of first-quarter GDP estimates. The quarter-on-quarter (QoQ) growth figure was revised down to 0.6%, but the annualised figure was revised up to 0.8%. While not as far as economists had expected, the fact that on the year growth was higher than previously thought still cheered investors. The US Dollar advanced ahead of a public appearance by Federal Reserve Chair Janet Yellen, who was receiving a reward from Harvard later in the day.
Tuesday’s Personal Consumption Expenditure figures could return the markets to a languorous state as traders once again wait to see if the results are supportive of tighter US monetary policy.
Canadian Dollar
A considerable slide in crude oil away from the US$50 per barrel mark weakened the Canadian Dollar. Further sapping ‘Loonie’ appetite were warnings from several economists that the Bank of Canada (BOC) had been too optimistic in its GDP forecasts. They challenged the BOC’s claims that, although GDP was likely to slow in Q2, it would rebound quickly in Q3.
Canada’s first quarter gross domestic product figures are due out on Tuesday. Even a positive figure may fail to inspire much confidence in the ‘Loonie’ as it is widely expected that the Alberta wildfires, among other factors, will have dragged on growth.
New Zealand Dollar
Thin global trading kept the New Zealand Dollar weak on Friday, with safe-haven demand on the rise. As a result, commodities slumped, taking high-risk assets like the ‘Kiwi’ with them.
It’s a mostly quiet week for New Zealand data, although Wednesday’s GlobalDairyTrade auction will have a significant impact upon the ‘Kiwi’.
Data Released
May 30th 22.00 EUR German Consumer Price Index (YoY) (MAY P) 0.1%
May 31st 22.30 CAD Gross Domestic Product (YoY) (MAR) (MAR)
May 31st 22.30 USD Personal Consumption Expenditure Core (YoY) (APR) 1.6%
June 1st 11.30 AUD Gross Domestic Product (YoY) (1Q)
June 1st 22.00 NZD Dairy Auction Avg. Winning Price MT (JUN 2)