Australian Dollar
The Australian Dollar slumped yesterday, despite a positive Chinese manufacturing PMI that should have supported the ‘Aussie’ higher. Instead of slipping to 51, the index instead held at 51.2. However, Chinese iron ore futures posted their biggest one-month decline in a year after falling another -6% to their lowest level since November. Additionally, Citigroup Global Chief Economist Willem Buiter claimed that the housing bubble currently threatening Australia is ‘quite spectacular’.
Australian first-quarter private capital expenditure will show how much businesses were investing on growth and productivity. A positive figure therefore bodes well for the economy.
Sterling
AUD/GBP exchange rates fluctuated wildly yesterday after a pair of contradictory election polls left markets unsure how to forecast next week’s general election. The first survey caused Sterling to slump after YouGov predicted that the Conservative Party would lose twenty seats, meaning the party would be sixteen short of a majority – a far cry from the original forecasts of a landslide victory for the Tories. However, a later poll from Panelbase put the Conservatives 15 points ahead of Labour. This saw the Australian Dollar firmly on the decline.
The UK Markit manufacturing PMI will set the tone for upcoming releases, with a poor figure here likely to have markets expecting the worst from next week’s key services figure. Once the latest round of PMIs have been released, economists will have two-thirds of the PMI data for the entire quarter and it will therefore start to become clear whether the economy weakened further.
Euro
Positive unemployment figures helped the Euro to shake off the dragging effects of soft sales and inflation data yesterday. The German unemployment rate dropped to 5.7% in May as forecast, even if the number of people out of work only fell by just over half what was expected. Joblessness in the Eurozone dropped to a below-forecast 9.3%, reaching its lowest level in over eight years. This helped make up for disappointing German retail sales data for April, which showed unexpected contraction on the month and on the year, so the Euro recorded strong gains.
Italy, the Eurozone’s third-largest economy, releases its finalised GDP figures for the first quarter of 2017 today.
US Dollar
The US Dollar slumped yesterday, with a lack of economic data and political concerns weighing on the ‘Greenback’. MBA mortgage applications figures were one of the few ecostats released; these showed a -3.4% decline in the number of mortgage applications made last week. A speech from Federal Reserve member Robert Kaplan was fairly on the fence; he noted that little slack remained in the labour market, but that global overcapacity could create problems for inflation. News that Donald Trump was planning to withdraw the US from the Paris Agreement on climate change unsettled the markets, as investors tried to assess the impact this could have upon international relations.
The US ADP employment change figure is often interpreted as having a bearing on the performance of the subsequent non-farm payrolls report, so a strong figure here tomorrow would likely boost the US Dollar and bets of a rate hike this month.
Canadian Dollar
In a display of remarkably poor timing, Canada posted impressive GDP figures just as the oil markets slumped. March’s month-on-month growth of 0.5% – against predictions of 0.2% – saw Canada shoot to the top spot of G7 economies during the first quarter. In the first three months of 2017 the Canadian economy grew 0.9% – one-and-a-half times that of the second fastest, Germany. However, news that Libyan oil production was now recovering from a technical issue on the nation’s oilfields saw focus return to the problem of the world’s crude oversupply. WTI Crude plunged -2.7%, while Brent Crude tumbled -3.1%.
Markit’s Canada manufacturing PMI covering May is set for release late tonight.
New Zealand Dollar
The New Zealand Dollar was outperforming its commodity peers yesterday, although fears about the extent of Chinese debt were keeping the ‘Kiwi’ muted. The ANZ activity outlook for May climbed from 37.7 to 38.3, while the ANZ business confidence index rose to 14.9 from 11, but NZD was largely unable to capitalise.
The only New Zealand data set for release today is the first-quarter terms of trade index. This measures the difference between import prices and export prices. A higher percentage is positive, as this indicates the nation is receiving more revenue from its exports than it is spending on imports. Forecasts are for a slowdown from 5.7% to 3.9%, however, suggesting sending goods and services overseas was less lucrative at the beginning of 2017 than at the end of 2016.
Data Released
June 1st 08.45 NZD Terms of Trade Index (QoQ) (1Q) 3.9%
June 1st 11.30 AUD Private Capital Expenditure (1Q) 0.8%
June 1st 18.00 EUR Italian Gross Domestic Product s.a. and w.d.a. (YoY) (1Q F) 0.8%
June 1st 18.30 GBP Markit UK PMI Manufacturing SA (MAY) 56.5
June 1st 22.15 USD ADP Employment Change (MAY) 185k
June 1st 23.30 CAD Markit Canada Manufacturing PMI (MAY) 55.8