Australian Dollar
An unexpectedly steady Australian private sector credit figure encouraged the Australian Dollar to push higher on Thursday, even though first quarter private capital expenditure fell short of forecast. Confidence in the ‘Aussie’ was also boosted by a stronger Chinese manufacturing PMI, which encouraged bets that commodity demand will pick up further. Although global geopolitical tensions were reignited by the Trump administration’s decision to impose steel and aluminium tariffs on key allies this was not enough to dent AUD exchange rates.
Any signs of softening in May’s manufacturing PMI could weigh heavily on the Australian Dollar ahead of the weekend.
Sterling
Investors were surprised to find that UK net consumer credit had leapt further than forecast in April, rising 1.8 billion on the month. This encouraged the Pound to recover ground against many of the majors overnight, with higher levels of credit suggesting a greater degree of domestic confidence. As March’s sharp slowdown in consumer credit was considered one of the reasons for the Bank of England’s (BoE) more dovish policy meeting this boosted hopes that an interest rate hike remains on the cards.
With forecasts pointing towards a dip in May’s UK manufacturing PMI, however, Sterling could soon come under renewed pressure.
Euro
The Euro remained on a stronger footing during Thursday’s European session, benefitting from news that the Five Star Movement and League are working to revive a coalition. With political jitters easing in Italy the appeal of the single currency naturally improved, especially as the latest Eurozone consumer price index bettered forecast. In an encouraging development for the European Central Bank (ECB) the inflation rate picked up to 1.9% on the year, just below the ECB’s 2% target.
Even so, the results of a vote of no confidence against Spanish Prime Minister Marino Rajoy could see the Euro weaken in response to renewed political uncertainty today.
US Dollar
Even as the Trump administration opted to impose steel and aluminium tariffs on the EU, Canada and Mexico this failed to shore up USD exchange rates. While markets are increasingly wary of the prospect of a trade war the appeal of the safe-haven US Dollar remained limited. Positive jobless claims data was not enough to bolster demand for the US Dollar, meanwhile, even though this demonstrates a continued tightening of the domestic labour market.
If May’s non-farm payrolls figure shows an uptick on the month this is likely to give USD exchange rates a boost, encouraging hopes of a more aggressive Federal Reserve policy outlook.
Canadian Dollar
The first quarter annualised Canadian gross domestic product failed to impress, with the pace of growth easing from 1.7% to 1.3%. This undermined confidence in the outlook of the Canadian Dollar, creating fresh doubt over the prospect of the Bank of Canada (BoC) raising interest rates again sooner rather than later. With heavy US steel and aluminium tariffs coming into forecast against Canada investors saw little reason to favour the Canadian Dollar overnight.
Demand for the Canadian Dollar could decline further this evening if the latest Canadian manufacturing PMI proves disappointing.
New Zealand Dollar
Even though May’s ANZ activity outlook dipped from 17.8 to 13.6 the New Zealand Dollar was still able to climb higher against its rivals. A similarly underwhelming ANZ business confidence index also failed to weigh on NZD exchange rates. Markets continued to favour the antipodean currency over its rivals yesterday as the general sense of risk appetite picked up.
With forecasts pointing towards a sharp contraction in the first quarter New Zealand terms of trade index, however, the New Zealand Dollar looks vulnerable to fresh downside pressure this morning.
Data Released
June 1st 08:45 NZD Terms of Trade Index (QoQ) (1Q) -2.0%
June 1st 09:00 AUD Manufacturing PMI (MAY) 57.1
June 1st 18:00 EUR Eurozone Manufacturing PMI (MAY F) 55.5
June 1st 18:30 GBP Manufacturing PMI (MAY) 53.5
June 1st 22:30 USD Change in Non-Farm Payrolls (MAY) 190,000