Australian Dollar (AUD) Spikes on Hawkish RBA
The Australian Dollar (AUD) shot up against its peers on Tuesday morning following a more-hawkish-than-expected move from the Reserve Bank of Australia (RBA).
The RBA hiked interest rates by 50 bps to 0.85%, rather than to 0.60% as expected, amid the strength of the economy and the current inflation pressures. The gains proved short-lived however, with the ‘Aussie’ retreating amid a subsequent shift in market risk appetite.
Into today, NAB business confidence may buoy the AUD if May’s release prints at 12 as expected, up 2 points from last month.
New Zealand Dollar (NZD) Falls on Risk Flows
The New Zealand Dollar (NZD) slumped yesterday as overall risk aversion dented support for the currency.
A lack of significant data exposed the ‘Kiwi’ to losses amongst persistent concerns over global inflation and geopolitical tensions. Furthermore, New Zealand’s main commodity – dairy – fell in value.
The ‘Kiwi’ is likely to face an uphill battle if the risk-off mood persists through today’s session.
Pound (GBP) Fluctuates PM Wins Confidence Vote
The Pound (GBP) wavered on Tuesday as UK Prime Minister Boris Johnson won a confidence vote triggered by his involvement in the ‘Partygate’ scandal.
Various conservative MPs expressed hopes that the affair will now be forgotten, although Johnson’s critics remain sceptical. Former conservative leader Lord Hague recommended that the PM ‘gets out’ in a way that spares party and country [further] agonies and uncertainties.
Capping losses meanwhile, the UK’s finalised services PMI exceeded expectations by printing at 53.4 in May.
A lack of significant data leaves Sterling to trade on external factors today – if risk appetite remains low, GBP may suffer.
Euro (EUR) Subdued by Disappointing German Data
The Euro (EUR) faced headwinds yesterday as German factory orders missed expectations, falling for the third consecutive month. New orders dropped by 2.7% in April 2022 following a 4.2% tumble in March.
Further pressuring the single currency was a weaker-than-expected German construction PMI. The construction sector contracted in May for the second month in a row as the country’s construction PMI fell sharply rather than climbing to 47.2 as expected.
Looking ahead, Euro area GDP could dampen EUR trading today if economic growth misses forecasts of 0.3%.
US Dollar (USD) Buoyed by Risk-Off Trading
The safe-haven US Dollar (USD) was bolstered on Tuesday by an overall risk-off mood, which drew support away from riskier assets.
Also lending USD exchange rates support was the publication of the US trade balance, which revealed a decrease in the country’s deficit – from $89.5bn to $87.1bn.
The ‘Greenback’ may continue to trade on risk flows today given a lack of significant US data; ongoing geopolitical tensions are likely to lend support to the currency.
Canadian Dollar (CAD) Climbs on Ivey PMI, Crude Dynamics
The Canadian Dollar (CAD) rose yesterday although Canada’s trade balance missed expectations: the country’s surplus printed at C$1.5bn for the month of April rather than the C$2.9bn predicted.
Also lending support to the currency was a stronger-than expected Ivey PMI and firming crude oil prices. The Ivey PMI hit 72 for the month of May rather than 64 as forecast.
Data Releases
Jun 8th 11:30 AUD NAB Business Confidence (May) 12
Jun 8th 16:00 EUR German Industrial Production (Apr) 1%
Jun 8th 19:00 EUR GDP Growth Rate 3rd Est. (Q1) 0.3%