Australian Dollar
With this morning’s key US interest rate decision just around the corner, the Australian Dollar had plummeted yesterday. Markets were expecting no changes to be made at the meeting of the Federal Open Market Committee (FOMC), but have strong hopes for the June gathering. They therefore thought it likely that US policymakers would signal an intention to tighten rates next month, which would have cooled demand for the Australian Dollar.
There is also a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe today, which further gave AUD pause for thought yesterday.
Sterling
Another above-forecast UK PMI failed to provide solid support for the Pound, although it still gained 1% on the Australian Dollar. Overall GBP was on an uneven footing, despite the Markit construction PMI rising from 52.2 to 53.1 instead of ticking down to 52 as predicted. Considering the manufacturing index on Tuesday had also risen, the hope was that the vital services index today would complete a trio of strong business surveys. However, suggestions that the Brexit divorce bill the UK will have to pay may have risen from €60 billion to €100 billion unsettled the Pound.
Euro
The Euro was largely weakening yesterday, despite positive German labour market figures and solid Eurozone GDP data. The number of unemployed people in Germany declined by -15,000, beating forecasts by 3,000, although the unemployment rate remained at 5.8%. Meanwhile, Eurozone economic growth clocked in at 0.5% as expected in the first quarter of 2017, while growth at the end of 2016 was also revised up to 0.5%. Year-on-year GDP remained at 1.7% in line with projections. However, with only a few days to go until the final round of the French Presidential Election, the Euro was kept largely on the decline.
Eurozone retail sales figures for March are set for release today.
US Dollar
US job creation figures printed in line with forecasts yesterday, showing a six-month low of 177,000 for April; down from 255,000 in March. Investors often see this as an indicator for the performance of Friday’s non-farm payrolls report – a highly influential release that the Federal Reserve uses to gauge the strength of the labour market when setting interest rates. Even though the weak ADP figures therefore suggest a gloomy result on Friday, the US Dollar was able to rise, gaining 1.1% on the Australian Dollar.
The Federal Open Market Committee (FOMC) has already announced its latest policy decisions, but the fallout from this meeting will continue to be one of the largest drivers of movement on the currency markets today.
Canadian Dollar
The Canadian Dollar was on mixed form yesterday, even though the American Petroleum Institute (API) had released a report suggesting US crude oil stocks declined markedly last week. Oil prices rose on the hope that US demand was rebounding, but after a brief period of gains the ‘Loonie’ mostly retreated again, although it was able to maintain bullish gains versus the ‘Aussie’.
Canadian international merchandise trade figures for March will be released later tonight.
New Zealand Dollar
Strong labour market data initially boosted the New Zealand Dollar yesterday, but NZD quickly fell as investors cashed in on their profits. The first-quarter employment change rose 1.2% on the quarter – against predictions of 0.8% – while the year-on-year measure only slipped from 5.8% to 5.7% instead of to 5.3%. This caused the unemployment rate to drop further-than-expected from 5.2% to 4.9%. Somewhat taking the shine off the data were weaker-than-predicted wage growth figures, which could bode ill for inflation and therefore the outlook on interest rates.
There is little New Zealand data on the calendar today, with the ANZ commodity price index being the most influential, given its potential impact upon inflation.
Data Released
May 4th 04.00 USD Federal Open Market Committee Rate Decision (MAY 03) 1.00%
May 4th 11.00 NZD ANZ Commodity Price (APR)
May 4th 13.10 AUD RBA Governor Lowe Speech
May 4th 18.30 GBP Markit/CIPS UK Services PMI (APR) 54.5
May 4th 19.00 EUR Eurozone Retail Sales (YoY) (MAR) 2.1%
May 4th 22.30 CAD International Merchandise Trade (Canadian dollar) (MAR) -CA$0.85b