Australian Dollar
Strength in global steel production, combined with a soft US Dollar, sent the Australian Dollar on a bullish advance yesterday. According to the World Steel Organisation, year-on-year steel production increased 4.6% in March, while first-quarter production rose 5.7% compared to the same period in 2016. This has kept demand for iron ore – Australia’s principle export – firm and Commonwealth Bank released a report suggesting Australia’s iron ore exports to China would continue to build over the rest of the year.
The Westpac leading index is the most influential Australian data set for release today. It will give an outlook on the economy, so a rise could support the ‘Aussie’ higher.
Sterling
A cocktail of threats to the Pound allowed the AUD/GBP exchange rate to climb 0.6% during yesterday’s session. UK public borrowing figures showed that the government started the new financial year with above-forecast spending. The deficit widened £1.5 billion further-than-expected to -£9.6 billion. Meanwhile, data from the Confederation of British Industry (CBI) showed that sentiment amongst UK retailers fell at the fastest pace since 2012 this month. Additionally, sentiment was further lowered by the horrific terrorist attack in Manchester, where a suicide bomber killed at least 22 people and injured over 50 more at an Ariana Grande concert.
Euro
The Euro was largely on soft form yesterday, despite a run of almost entirely above-forecast PMIs for Germany, France and the Eurozone. The Ifo survey results for Germany showed improving attitudes towards the business climate, expectations and current assessment, but the common currency was still largely on the decline. This was because Eurogroup had failed to reach an accord at its latest meeting, dashing hopes that the next tranche of Greek bailout funds would be swiftly unlocked this week. The issue now has to wait until the June 15th meeting, which leaves little room for error considering Greece needs the €7.5 billion payment by July.
European Central Bank (ECB) President Mario Draghi is set to give a speech in Madrid tomorrow night. This could weaken the Euro, as Draghi has a habit of being pessimistic about the future of monetary policy.
US Dollar
The US Dollar slumped versus the Australian Dollar yesterday, although against some of the majors it was able to record slight gains. The ‘Greenback’ still lacks direction overall, however, with no news to change market sentiment towards it. Two Fed officials spoke, but Lael Brainard claimed it was still ‘uncertain’ if the US economy could be judged to be at full employment, while Charles Evans did not comment on monetary policy or the outlook of the US economy.
With the Federal Open Market Committee (FOMC) monetary policy meeting minutes from the beginning of this month due out early tomorrow morning, the US Dollar could remain on lacklustre form today.
Canadian Dollar
The Canadian Dollar was on strong form against the safer currencies, but lost out versus its commodity brethren. Wholesale sales figures for March showed a slightly worse-than-expected increase from 0.3% to 0.9%, against forecasts of 1% growth. However, February’s data was revised higher, showing that sales actually grew 0.3% – initially it was thought they had declined -0.2%. This, combined with a general recovery in risk-appetite, supported the Canadian Dollar higher.
Traders will spend tomorrow awaiting Thursday’s midnight Bank of Canada (BOC) monetary policy announcements, which will likely keep the ‘Loonie’ soft in the interim.
New Zealand Dollar
Despite a lack of domestic data, the New Zealand Dollar was on bullish form yesterday, even managing to hold onto opening levels against the Australian Dollar. Optimism ahead of this week’s government budget continued to push the ‘Kiwi’ higher.
New Zealand trade figures are due for release this morning. The ‘Kiwi’ could row back on some of its recent gains if forecasts prove to be correct, as the trade surplus is expected to weaken by around -NZ$65 million.
Data Released
May 24th 08.45 NZD Trade Balance (New Zealand dollars) (APR) NZ$267m
May 24th 10.30 AUD Westpac Leading Index (MoM) (APR)
May 24th 22.45 EUR ECB President Draghi speaks in Madrid
May 25th 00.00 CAD Bank of Canada Rate Decision (24 MAY) 0.50%
May 25th 04.00 USD FOMC Meeting Minutes (3 MAY)