Australian Dollar
The Australian Dollar slumped yesterday as bets of a US interest rate hike rocketed sharply higher. The recent slump in iron ore prices also weighed on the ‘Aussie’, as did a run of less-than-impressive domestic data. The AiG performance of manufacturing index for May dropped from 59.2 to 54.8, while first-quarter private capital expenditure grew 0.3% instead of 0.5%. Retail sales greatly outperformed forecasts to rise 1% instead of 0.3%, but May’s commodity index weakened from 132.7 to 128.5.
Although HIA new home sales data for April is set for release this morning, the Australian Dollar is more likely to be influenced by the day’s headline US data.
Sterling
AUD/GBP exchange rates raced lower yesterday after a better-than-expected UK Markit manufacturing PMI was released. The index was expected to weaken from 57.3 to 56.5, but instead only fell to 56.7. Even taking the marginal slowdown in growth into account, the sector still remained on strong form, with demand and hiring at particularly high levels. This suggested that the UK economy may be able to somewhat rebound from the weakness experienced during the first quarter of the year.
Markit’s UK construction PMI is set for release this evening. Although expected to weaken slightly, the idnex would probably have to print significantly below forecasts, taking it dangerously close or into contraction territory, to cause much of a stir for the Pound.
Euro
The Euro may have managed to record strong gains against the Australian Dollar yesterday, but elsewhere the common currency was on decidedly mixed form. A strong run of data was not enough to keep the Euro on the rise, even after the latest PMIs for Eurozone member states revealed a surge in the pace of new employment. Italian GDP for the first quarter also impressed, printing at 0.4% on the quarter instead of 0.2% and 1.2% on the year instead of 0.8%.
Eurozone producer price index figures this evening could give an indication of whether inflationary pressures in the currency bloc are rising or falling.
US Dollar
The US Dollar was on bullish form yesterday after odds of an interest rate hike during the June 14th monetary policy meeting surged up to 91.2%. Speaking in Seoul, the Federal Reserve’s John Williams commented that he still expected a total of three interest rate hikes this year, with the potential for four should the economy receive a boost from fiscal stimulus. On a data front, the ADP employment change figure clocked in significantly above-forecast at 253,000 – economists had predicted 180,000. This indicates that conditions in the labour market continue to tighten; removing a big potential hurdle to a Fed hike. Additionally, the ISM manufacturing index beat forecasts of a hold at 54.8 to edge up to 54.9.
The highly-influential US non-farm payrolls report will be released tonight. A figure in line with forecasts is all that is needed to keep the markets confident that the Federal Reserve will vote to hike interest rates this month.
Canadian Dollar
Crude oil had stabilised after yesterday’s slump, allowing the Canadian Dollar to largely make strong gains. The ‘Loonie’ did lose out against the safer US Dollar and Pound Sterling, however. Oil markets were cheered by reports that OPEC had actually discussed increasing the magnitude of its oil production cuts by 1-1.5% at their latest meeting and could revisit the issue again. Meanwhile, the latest Canadian manufacturing PMI showed that sector growth remained strong, even if the index did weaken from 55.9 to 55.1.
Canadian international merchandise trade data today will show how Canadian imports and exports fared in April.
New Zealand Dollar
Strong bets of an interest rate hike in two weeks’ time from the Federal Reserve pressured the New Zealand Dollar lower yesterday. This was despite positive domestic data, with the terms of trade index for the first quarter only falling from an upwardly-revised 5.8% to 5.1% instead of slumping to 3.9% as predicted.
Data Released
June 2nd 11.00 AUD HIA New Home Sales (MoM) (APR)
June 2nd 18.30 GBP Markit/CIPS UK Construction PMI (MAY) 52.7
June 2nd 19.00 EUR Eurozone Producer Price Index (YoY) (APR) 4.5%
June 2nd 22.30 CAD International Merchandise Trade (Canadian Dollar) (APR) -CA$0.07b
June 2nd 22.30 USD Change in Non-farm Payrolls (MAY) 182,000