- ‘Aussie’ Boosted by Commodity Rally – US data confuses Fed rate hike odds
- AUD/GBP Bullish on Disappointing UK GDP – Annual growth estimate revised down
- AUD/EUR Advances – Risk-on trading limits Euro gains
- New Zealand Dollar Bullish – Treasury forecasts large budget surpluses
Australian Dollar
A commodity rally strengthened the Australian Dollar yesterday despite a significant drop in domestic capital expenditure. Business investment in new machinery and other assets fell -5.2% in the first quarter of the year, significantly more-than-expected. However, the strong recovery in commodities kept the ‘Aussie’ in positive territory against a number of its peers. Commodity indexes as a whole rose more than 0.5% while precious metals all advanced, with copper and platinum gaining 1% and silver advancing 1.7%.
With little on the Australian data calendar today, except a panel participation by the Reserve Bank of Australia’s (RBA) Guy Debelle, the ‘Aussie’ could find its strength dictated by the response of the US Dollar to the day’s high profile data.
Sterling
The Australian Dollar was able to make significant gains on Pound Sterling yesterday after the release of disappointing first quarter UK GDP figures. The second round of growth estimates continued to see economic expansion at 0.4% quarter-on-quarter, but expectations for the yearly figure were shaved down to 2%. A near -10% drop in loans for house purchase in April and a -0.3% decline in first quarter exports further weakened the overall economic picture.
The GfK Consumer Confidence Survey result for May is the only UK data released today.
Euro
With no data from the Eurozone released yesterday, the Euro found itself at the mercy of market sentiment. The common currency put on a mixed performance, making bullish gains against Pound Sterling – thanks to the weak GDP printing – and the US Dollar after the day’s headline data failed to solidify rate hike bets. As a safe-haven asset, the Euro also suffered from the growing risk appetite surrounding the commodity rally. However, strong oil prices boosted hopes of building Eurozone inflationary pressures.
US Dollar
Investors were hoping that yesterday’s US durable goods orders figure would show a strong gain. Yet despite getting what they wished for, US Dollar appetite remained low as a closer inspection of the figures revealed less to be cheerful about than first thought. The main driver behind the 3.4% advance in April was a 64.9% surge in the volatile civilian aircraft category, which pushed up the headline figure despite overall weakness in other sectors. The figure was therefore not the conclusive evidence of strong demand investors had hoped for and the US Dollar consequently extended bearish losses verses the majors.
Another reason for the lack of US Dollar appetite thus far is hesitation ahead of today’s important calendar events; the release of first quarter GDP and a speech by Federal Reserve Chair Janet Yellen.
Canadian Dollar
Both Brent and WTI crude oil broke above US$50 per barrel yesterday. The Canadian Dollar made small gains against the Australian Dollar while advancing more than 0.8% on Pound Sterling and the US Dollar. Oil at US$50 per barrel is the point at which industry experts claim oil producers can become profitable again, meaning companies across the globe will be able to stop eating into their reserves and focus on investment.
The only Canadian data set for release today is the CFIB Business Barometer.
New Zealand Dollar
Several positive developments boosted the New Zealand yesterday. The overall global commodity rally provided strong tailwinds for the ‘Kiwi’, which continued after the day’s disappointing US data release. The latest Treasury forecasts predicted a strong increase in budget surpluses each year from the present until 2020, where it is expected the government will underspend by NZ$6.7 billion. In further positive news, the world’s largest dairy co-operative, Fonterra, announced that it expects to pay more to farmers next season.
There is no New Zealand data set for release today, but the US calendar likely holds significant volatility in store for the ‘Kiwi’.
Data Released
May 27th CAD CFIB Business Barometer (MAY)
May 27th 08.30 AUD RBA’s Debelle in Panel Participation
May 27th 09.05 GBP GfK Consumer Confidence Survey (MAY) -4
May 27th 22.30 USD Gross Domestic Product (Annualized) (1Q S) 0.9%