Australian Dollar
Improved Federal Reserve rate hike bets and the resultant downtrend in gold prices weighed on demand for the Australian Dollar last week. With political uncertainty also hampering investor confidence, the ‘Aussie’ (AUD) continues to hold a weak position versus the US Dollar.
However, AUD exchange rates recovered during Tuesday’s European session after Asian stocks closed the Asian session higher, provoking greater demand for high-yielding assets.
Yesterday’s domestic ecostats also provided some AUD support with April’s Building Approvals and Private Sector Credit bettering expectations. With the US Dollar holding a strong position amid heightened speculation of a June Federal Reserve rate hike, however, there is potential for a resumption of ‘Aussie’ depreciation today.
AiG’s Performance of Manufacturing Index may provoke AUD exchange rate changes, although China’s Manufacturing PMI report and Australia’s first-quarter Gross Domestic Product data is far more likely to have an impact.
Sterling
In recent weeks the British Pound has made healthy gains versus its peers as traders react to EU referendum opinion polls indicating that ‘remain’ will be victorious. Such has been the impact of the polls that domestic data has inspired comparatively little movement.
However, the GBP uptrend does not mask the UK’s underlying economic concerns as growth falters. And as we move ever closer to the June 23rd EU referendum, fears of a ‘Brexit’ may come back to the fore and serve to weaken Sterling considerably.
Later in the evening UK data may cause GBP volatility with Markit’s Manufacturing PMI in focus. If manufacturing output remains below the 50 mark that separates growth from contraction the Pound is likely to succumb to losses.
Euro
After Federal Reserve Chairwoman Janet Yellen stated that a near-term rate hike is now ‘appropriate’, the resultant US Dollar upsurge caused the Euro to weaken significantly. This added to fears of widening policy divergence between the Fed and the European Central Bank (ECB) as Eurozone inflation remains well below the bank’s target.
However, yesterday evening saw the Euro halt losses after German labour market data bettered estimates. The single currency remains comparatively weak, however, especially with the potential for a ‘Brexit’ weighing on investor confidence.
US Dollar
As mentioned above, Yellen’s hawkish sentiment caused the US Dollar to rise amid hopes that the Federal Open Market Committee (FOMC) will look to hike rates. This means that policy is more likely to be data dependent, which could see marked USD price swings depending on results.
Yesterday saw the US Dollar trending statically versus a number of peers despite comparatively positive data. This can be related to a combination of trader profit taking and ongoing domestic political uncertainty.
Traders will likely be looking ahead to early tomorrow morning when US ISM Manufacturing data is published. A positive result could reignite the ‘Greenback’ (USD) uptrend.
Canadian Dollar
Overnight crude oil prices dropped back below $50 a barrel in reaction to solid output from the Middle East. This weighed on demand for the Canadian Dollar, especially with the US Dollar continuing to hold a comparatively high trade weighting.
Also dampening demand for the ‘Loonie’ (CAD) was mixed results from GDP data. Annual Canadian GDP failed to meet with expected growth in March, but the quarterly reading slightly bettered estimates.
New Zealand Dollar
Much like its South Pacific counterpart, the New Zealand Dollar strengthened overnight in response to improved market sentiment. The ‘Kiwi’ (NZD) continues to hold losses versus the Australian Dollar, however, amid heightened expectations of the Reserve Bank of New Zealand (RBNZ) introducing a rate cut within the next few policy meetings.
China’s manufacturing data is likely to have a significant impact on NZD exchange rates today. Later tonight, the Dairy Auction is also likely to inspire ‘Kiwi’ volatility.
Data Released
June 1st 09:30 AUD AiG Performance of Manufacturing
June 1st 11:00 CNY Manufacturing PMI
June 1st 11:30 AUD Gross Domestic Product
June 1st 22:00 NZD Dairy Auction
June 2nd 00:00 USD ISM Manufacturing
June 3rd 09:30 AUD AiG Performance of Service Index
June 3rd 22:30 USD Unemployment Rate
June 3rd 22:30 USD Change in Non-Farm Payrolls
June 4th 00:00 USD Non-Manufacturing Composite