Australian Dollar
The Australian Dollar largely struggled on Friday after strong US data pushed the US Dollar higher. However, the ‘Aussie’ was able to make strong gains versus the tumbling Pound and Euro. There were no new data releases to change the outlook for AUD.
There is no headline Australian data due for publication this week, but Wednesday’s Chinese manufacturing PMI will have a strong impact upon the Australian Dollar.
Sterling
AUD/GBP was able to make bullish gains on Friday thanks to the latest UK voter polls. Surveys showed that support for the Labour Party continued to charge higher, with the Conservative Party lead slashed to five points from nine last week and from 18 when the election was first called. A close election increases the odds of political instability and so investors were quick to sell out of the Pound.
Considering the sharp slowdown recorded in economic growth for the UK in the first quarter, investors will want to see signs that a pick-up is likely. If Wednesday’s GfK consumer confidence survey doesn’t print well, therefore, the Pound could decline further.
Euro
There was little data out to support the Euro yesterday and so, combined with downside pressure from the bullish US Dollar, the common currency slumped. Italian consumer and business confidence both weakened. Consumer confidence had been expected to slip slightly, but instead fell from 107.4 to 105.4, while business confidence was predicted to rise but instead dropped from 107.7 to 106.9.
Preliminary German consumer price index figures for May will be released on Tuesday; if inflation moves further above the European Central Bank’s (ECB) target range, the Euro is likely to rise on hopes policymakers will be forced to raise interest rates.
US Dollar
After several days of sliding lower, the US Dollar finally managed to record some strong gains on Friday. Things were still mixed overall, with the Canadian Dollar and New Zealand Dollar proving too strong for the ‘Greenback’. First-quarter GDP and durable goods figures both outperformed forecasts. Growth was revised from 0.7% to 1.2% instead of to 0.9%, while goods orders contracted -0.7% instead of -1.5%. This, combined with odds of a June interest rate hike from the Federal Reserve of 87.7%, reignited appetite for USD.
Personal consumption expenditure core figures – the Fed’s favourite measure of inflation – for April will be released on Tuesday.
Canadian Dollar
The Canadian Dollar was recovering on Friday from investor disappointment that OPEC only extended the duration of its production cuts, rather than increasing the magnitude as well. Weakness in other currencies was also helping the ‘Loonie’ advance, even though there was no domestic data and crude oil prices remained subdued.
Quarterly Canadian GDP figures are due out on Wednesday; a robust figure here could help improve the outlook on monetary policy.
New Zealand Dollar
The New Zealand Dollar was firmly on the uptrend on Friday, continuing its recent climb away from the eleven-month low it has been languishing in against some of its peers for several weeks now. News of a strong government surplus, coupled with near-certainty over the near-term path of US interest rates, prompted investors to buy back into the ‘Kiwi’.
Like Australia, New Zealand will release no tier one data this week, but the New Zealand Dollar will also be heavily influenced by the Chinese manufacturing data.
Data Released
May 30th 22.00 EUR German Consumer Price Index (YoY) (MAY P) 1.7%
May 30th 22.30 USD Personal Consumption Expenditure Core (YoY) (APR)
May 31st 09.01 GBP GfK Consumer Confidence Survey (MAY) -8
May 31st 11.00 CNY Manufacturing PMI (MAY) 51
May 31st 22.30 CAD Quarterly Gross Domestic Product Annualized (1Q) 3%