Weak US Data Offers Australian Dollar Boost
The Australian Dollar benefitted from the latest signs of weakness within the US manufacturing sector overnight, even as global trade tensions continued to mount. Speculation that the Trump administration considered imposing tariffs on Australian aluminium weighed heavily on the minds of investors at the start of the week. May’s TD Securities inflation gauge failed to offer any particular support to AUD exchange rates, meanwhile, as signs point towards price pressures failing to accelerate.
If the Reserve Bank of Australia (RBA) cuts interest rates as forecast today the Australian Dollar is likely to shed fresh ground.
Surprise Manufacturing PMI Contraction Dents Pound
May’s UK manufacturing PMI failed to offer investors cause for confidence last night as the index unexpectedly slumped from 53.1 to 49.4. This surprise contraction within the manufacturing sector prompted the Pound to trend lower across the board amid speculation that the economy is losing momentum in the second quarter. As stockpiling activity fell in the wake of the Brexit deadline extension this left the manufacturing sector in a weaker state, to the detriment of GBP exchange rates.
Another decline from the UK construction PMI may add to the bearish mood of the Pound this afternoon.
Euro Holds Ground Ahead of Eurozone Inflation
Confirmation that the Eurozone manufacturing sector continued to weaken last month was not enough to drive EUR exchange rates lower. As the PMI remained in line with the provisional figure this limited the impact of the data, even though weakness within the German manufacturing sector remains a cause for concern. With the impact of increased global trade tensions already weighing on the Eurozone economy EUR exchange rates look vulnerable to any fresh trade action from the US.
Tonight’s Eurozone consumer price index data is likely to put pressure on the single currency, with the inflation rate expected to fall back on the year.
Disappointing Manufacturing Data Weighs on US Dollar
Worries over the health of the US economy picked up last night after both the ISM and Markit manufacturing PMIs showed a decline on the month. Businesses expressed concern over the slowing impact of the US-China trade dispute, suggesting that further weakness is likely in the months to come. This exposed the US Dollar to another bout of selling pressure, even though market risk appetite remained limited thanks to the increasing risk of a global recession.
A monthly contraction in factory orders may leave USD exchange rates on the back foot overnight.
Manufacturing Sector Contraction Undermines Canadian Dollar Confidence
The Canadian manufacturing sector slipped further into contraction in May, undermining the recent bout of confidence in the economic outlook. As the PMI failed to show any improvement on the month, defying forecasts, this suggests that the Bank of Canada (BOC) may have been overly optimistic in its recent assessment. This weaker showing raised fears that the economy remains in a vulnerable state, especially as global trade tensions continue to mount.
Without a rally in oil prices CAD exchange rates look set to trend lower over the course of the day.
Global Growth Worries Fail to Hold Back New Zealand Dollar
Although confidence in the global growth outlook continued to diminish at the start of the week this was not enough to prevent the New Zealand Dollar making some gains across the board. NZD exchange rates benefitted from the underwhelming nature of the latest US manufacturing data, even though investors continue to see little cause for optimism within the New Zealand economy.
As forecasts point towards a rebound in the first quarter terms of trade index this could encourage the New Zealand Dollar to push higher still against its rivals this morning.
Data Releases
June 4th 08:45 NZD Terms of Trade Index (QoQ) (1Q) 0.5%
June 4th 14:30 AUD Reserve Bank of Australia Rate Decision 1.25%
June 4th 18:30 GBP Construction PMI (MAY) 50.5
June 4th 19:00 EUR Eurozone Consumer Price Index (YoY) (MAY) 1.3%
June 5th 00:00 USD Factory Orders (APR) -0.9%