Australian Dollar (AUD) Benefits from Chinese Loan Rate
The Australian Dollar (AUD) remained supported through Monday’s session by the People’s Bank of China (PBoC)’s decision to lower its five-year loan prime rate.
The PBoC decided at the end of last week to cut its loan prime rate to avoid an economic slowdown – the first cut since January. The move is designed to stimulate growth in the Chinese economy, and is therefore boosting the China-proxy Australian Dollar.
Today’s PMI data may affect ‘Aussie’ exchange rates ahead. Both manufacturing and service sector activity looks to have fallen in May, exerting possible AUD headwinds. In addition, the election results could cause some movement.
New Zealand Dollar (NZD) Enjoys Risk-On Mood
The New Zealand Dollar (NZD) hit a two-week high at the beginning of this week, as risk-on tailwinds lent NZD an upside alongside hawkish expectations for the Reserve Bank of New Zealand (RBNZ).
As a corrective downside in the safe-haven US Dollar (USD) continues, perceived-riskier currencies attract more support. Meanwhile, the RBNZ is expected to hike interest rates by an additional 50 bps midweek.
Into today, retail data could depress the ‘Kiwi’, as sales are expected to have fallen by 1% in the first quarter of 2022.
Pound (GBP) Wavers amid Lack of Data
The Pound (GBP) traded mixed yesterday, despite enjoying a modest upside via risk-on tailwinds. A lack of UK data exposed the currency to external factors, including Brexit concerns and inflationary pressures.
Worries over the ongoing conflict in Ukraine also persisted. As the World Economic Forum opened today in Davos, Ukrainian President Volodymyr Zelensky called for further sanctions against Russia.
Today’s PMI releases may exert further headwinds against Sterling, as economists expect a slowdown in business activity. However, after last week’s unexpectedly strong data, could markets be in for a surprise?
Euro (EUR) Boosted by German Ifo Index
The Euro (EUR) rebounded against several peers on Monday as Germany’s Ifo business climate index unexpectedly improved.
In addition, European Central Bank (ECB) President Christine Lagarde published a blog post signalling ECB rate rises in July and September, giving EUR a strong boost.
The PMIs for both the Euro area and Germany are expected to have fallen today, potentially subduing the single currency later on.
US Dollar (USD) Downtrend Continues on Positive Risk Flows
The US Dollar extended its downtrend against the majority of its peers on Monday, as risk-on headwinds capped gains for the currency.
As the USD index reached its lowest level since 26 April, economists speculated that weakness in the ‘Greenback’ represented a correction following the currency’s recent rally. As the US outlook improves, yields may resume rising which should help the Dollar regain some traction.
If services and manufacturing activity fell in May as expected – in other regions besides the US – a risk-off mood could also lend support to the US Dollar.
Canadian Dollar (CAD) Dims on Crude Oil Losses
The Canadian Dollar (CAD) tumbled yesterday, as WTI crude fell in value. Demand outlook may be wavering on account of new Covid infections in Beijing.
Data Releases
May 24th 08:45 NZD Retail Sales (Q1) -1%
May 24th 09:00 AUD S&P Global Manufacturing PMI Flash (May) 58
May 24th 09:00 AUD S&P Global Services PMI Flash (May) 55.3
May 24th 17:30 EUR German S&P Global Manufacturing PMI Flash (May) 54
May 24th 17:30 EUR German S&P Global Services PMI Flash (May) 57.2
May 24th 18:00 EUR S&P Global Manufacturing PMI Flash (May) 54.9
May 24th 18:00 EUR S&P Global Services PMI Flash (May) 57.5
May 24th 18:30 GBP S&P Global/CIPS Manufacturing PMI Flash (May) 55
May 24th 18:30 GBP S&P Global/CIPS Services PMI Flash (May) 57
May 24th 20:00 GBP CBI Distributive Trades (May) -30
May 24th 23:45 USD S&P Global Manufacturing PMI Flash (May) 57.5
May 24th 23:45 USD S&P Global Services PMI Flash (May) 55.2
May 25th 02:20 USD Fed Chair Powell Speech N/A
May 25th 04:00 EUR ECB Lagarde Speech N/A