Australian Dollar
The Australian Dollar enjoyed a significant boost early on Saturday after key US data severely disappointed forecasts. Bullish gains were recorded against the ‘Greenback’, although elsewhere the ‘Aussie’s gains were more muted. This was due to negative headwinds generated by a report from the Organisation for Economic Co-operation and Development, which warned a property crash was on the horizon. The report suggested a soft-landing was unlikely, which somewhat curbed the Australian Dollar’s advance.
Australia’s most important economic development this week will likely be the Reserve Bank of Australia’s rate decision tomorrow. No change is predicted, but investors will be trying to gauge the outlook of the board. Suggestions of a continued move away from an easing bias could give the Australian Dollar a chance to rally.
Sterling
AUD/GBP made small gains on Friday. Pound Sterling exchange rates were polarised between bullish gains against less risky assets and slumps against commodity currencies. Domestically, the latest services data continued the trend of appearing positive until the figures were more closely analysed. The services PMI advanced further-than-forecast, yet the sector appeared weak overall, boosting fears of a Q2 slowdown for the UK economy.
Because of these fears, Wednesday’s industrial and manufacturing production figures will be closely watched, as anything other than a strong recovery will be further evidence that slowdown fears are justified.
Euro
Eurozone PMIs were mixed on Friday, with most services and composite indexes showing either the forecast, or better, levels of growth. Italy’s services industry unexpectedly entered contraction territory, however. In other bearish domestic news, Bundesbank cut its forecasts for German growth and inflation for the next two years, blaming weakening export demand. However, because of the weakness of the US Dollar and the dwindling chances of policy divergence from the Federal Reserve, the Euro was able to make some strong gains, although it barely moved above opening levels verses the ‘Aussie’.
The coming week contains multiple speeches from European Central Bank (ECB) officials which could cause Euro volatility, as could Eurozone GDP and German CPI figures.
US Dollar
The latest labour market data from the US painted a dire picture on Saturday, causing the US Dollar to crash as the odds of a Federal Reserve rate hike in June were all but eradicated. Things began poorly with -37,000 jobs being sliced from the previous month’s figure, taking it more than -100,000 below the long-term average. 164,000 new roles were predicted to have been created in May, but the market generated a comparatively meagre 38,000 jobs. Unemployment unexpectedly dropped to 4.7%, but this was due to a decline in the number of people actively looking for work. The chances of a June rate hike, according to the futures market, fell to just over 5%.
Fed Chair Janet Yellen speaks in Philadelphia early on Tuesday morning, so there is a chance her comments could go some way towards repairing investor hopes of monetary tightening. Given how cautious she was in comments the week before the latest poor data, however, it is unlikely Yellen will offer anything close to hawkishness.
Canadian Dollar
Canadian trade figures may have shown a narrowing of the deficit and a downward revision of last month’s shortfall, but the overall poor state of the figures kept appetite for the Canadian Dollar weak on Friday. Even with the revision, the deficit recording in March remains the highest on record and economists were disappointed that that exports didn’t post a stronger recovery after two consecutive months of decline. The drop in the US Dollar at least allowed the Canadian Dollar to make one set of bullish gains, although overall the ‘Loonie’ slumped.
The most high-profile Canadian data this week will be the unemployment rate and net change in unemployment figures released on Friday.
New Zealand Dollar
The New Zealand Dollar was tipped into a bullish charge after the release of extremely disappointing US data. Domestic data was also supportive, with the value of all buildings rising 5.3% instead of slowing from the previous 2.8% to the forecast 1%. ANZ commodity prices increased 1% after a -0.8% decline in April.
The New Zealand Dollar could remain bearish over the coming days due to the fact that Thursday’s interest rate decision from the Reserve Bank of New Zealand (RBNZ) is expected to yield a -0.25% cut to the official cash rate, taking it down to 2.00%.
Data Released
June 7th 02.30 USD Fed Chair Yellen to Speak in Philadelphia
June 7th 14.30 AUD Reserve Bank of Australia Rate Decision (JUN 7) 1.75%
June 7th 19.00 EUR Eurozone Gross Domestic Product s.a. (YoY) (1Q F)
June 8th 18.30 GBP Industrial Production (YoY) (APR)
June 8th 18.30 GBP Manufacturing Production (YoY) (APR)
June 9th 07.00 NZD Reserve Bank of New Zealand Rate Decision (JUN 9) 2.00%
June 10th 22.30 CAD Unemployment Rate (MAY)
June 10th 22.30 CAD Net Change in Employment (MAY)