Australian Dollar
With the US Federal Open Market Committee (FOMC) committee minutes confirming that a near-term rate hike is likely, there was little demand for the risky Australian Dollar. The ‘Aussie’ slumped versus its peers, with losses accelerated by cool sentiment on the commodity markets. Additionally, analysts claimed that the recent worse-than-expected contraction in construction work done during the first quarter would drag on overall GDP.
There is nothing on the economic calendar for Australia today apart from a panel participation from the Reserve Bank of Australia’s (RBA) Tony Richards. This could leave AUD rudderless in the face of approaching headline US data.
Sterling
Even though the Pound was weak elsewhere, the AUD/GBP exchange rate recorded minor losses. Sterling was weighed upon by the latest estimate for UK first-quarter GDP, which revealed the economy had slowed even further than expected. At first analysts had estimated that economic growth had slowed from 0.7% to 0.3% in the first three months of the year, but the new estimate showed that the economy grew by just 0.2%.
Euro
The Euro was largely on the decline yesterday, with firming US rate hike bets serving to soften demand for the common currency. A lack of data similarly undermined the Euro, with the only figures released showing improving GDP in Spain but weakening industrial sales and orders for Italy.
US Dollar
The Federal Open Market Committee (FOMC) meeting minutes may have confirmed that a rate hike in June is very likely, but the US Dollar struggled to find much support yesterday. With market expectations for monetary tightening already high, there was little reason to change the outlook on USD. Meanwhile, the latest trade balance figures showed that the deficit widened to -US$67.6 billion instead of shrinking to -US$64.5 billion as markets had expected.
US first-quarter GDP figures and preliminary durable goods orders data for April will be released today. If these print poorly, this could soften the likelihood of the Federal Reserve raising interest rates next month, as the FOMC minutes suggested upcoming data needed to print in line with expectations to create supportive conditions for a hike.
Canadian Dollar
Strong earnings figures from Canada’s financial sector helped the Canadian Dollar to ignore weakness in the crude oil market. ‘Black gold’ was on the decline after OPEC agreed to extend the duration of its supply cut for another nine months, but without deepening the extent of cuts. Considering US companies have stepped into the void left by OPEC to produce more oil and therefore return the downside pressure to the market thanks to oversupply, it seems magnitude rather than duration is what is needed from a supply cut to tackle the problem. However, news that Royal Bank of Canada’s earnings were up 9% year-on-year, while TD Bank earnings were up 22% year-on-year, helped support the ‘Loonie’.
The only Canadian event left on the economic calendar this week is a speech from Bank of Canada (BOC) Deputy Governor Sylvain Leduc, so the market focus may remain on crude oil prices until the weekend.
New Zealand Dollar
The New Zealand Dollar was largely on strong form yesterday. Finance Minister Steven Joyce confirmed that the government was expecting to record a much bigger-than-expected budget surplus for the year to June. Half-year forecasts made in December had suggested the government was on track for a NZ$473 million underspend, but it now predicts an impressive NZ$1.62 billion surplus. Joyce announced that this would be put towards infrastructure projects to help boost the economy.
Data Released
May 26th 07.20 CAD Bank of Canada Deputy Governor Sylvain Leduc Speech
May 26th 14.30 AUD RBA’s Tony Richards Panel Participation
May 26th 22.30 USD Gross Domestic Product (Annualized) (1Q S) 0.9%