The Australian dollar didn’t really benefit much from a night marked by softer US data; the AUD is at 98.3 US cents, trading at the same level it was at 5.30 PM yesterday. US CPI contracted for the second month led by cheaper fuel coming in at -0.4% while the core CPI increased by 0.1%. This data was also met with a surprise jump in weekly jobless claims and lower housing starts. The data helped the Euro briefly push above 1.29 USD and it sit about 15 pips below there in early trade today as the market reshaped its QE bets for the June FOMC meeting.
One of the key reasons why the Australian dollar didn’t continue to rise after it peaked overnight at 98.7 US cents was that another Fed member suggested the QE stimulus could to be tapered down in the US summer, this time being Federal Reserve Bank of San Francisco President John Williams. The market confusion on what the Fed will actually do is limiting any upside in buying of risk currencies like the AUD and CAD with continued division within the Fed and economic data that can be interpreted for on both sides of the ledger.
Continuing along from what has been a light week of Australian economic data we see no key trade events today and little regionally as well. The lack of data matched with another week in the red for the Aussie should help keep it above 98 US cents today after it broke below that level twice last night.
The Australian dollar continued its recent slide during the Asian session, hitting lows of .983USD. Technical indicators point to a possible rebound after the Aussie has dropped significantly in recent days. It may be a case of dropping too much, too quickly, especially as the Australian dollar remains an attractive yield play even despite the recent rate cuts. Considering that employment remains relatively stable and GPD remains above 2.5% growth it would not be surprising to see some USD weakness come back into play and demand for yield return to the market.
The Euro continues to track lower today as traders brace for CPI figures that will show inflation at multi year lows. With speculation around the lengths that Draghi and the ECB will take to stimulate growth and investment in the 17 bloc nation, cooler inflation will allow for more unconventional methods. GDP in Europe contracted 0.2% in the last quarter which continues to pressure the euro lower; it continues to seem unlikely that Europe will start to pick up its recovery any time soon.
In the upcoming American session tonight, traders will be keen to see inflation out of the US. With the dollar attracting some buyers on the prospect of an early finish to QE, a low inflation print will really remove at least some of the odds of a premature finish to the bond program. The Fed will have to tread lightly on its comments regarding the exit of the QE program as it has attracted traders being fairly bullish on the greenback as prints continue to come in above expectations. A sudden exit to the plan however could see deflation come into the economy if the print from tonight’s CPI is below expectations.
The Australian dollar was a little better supported overnight as softer Industrial production and PPI data out of the states increased those betting on stimulus to remain at the status quo. The Aussie broke back through the 99 US cent mark late in the European session and again late in the US session. The US dollar also hit high against the Yen, surging up to 102.7 Yen as some of the optimism about the state of the US economy abated. Most US denominated currency pairs finally steadied after what has been 10 days of US dollar strength seeing the Pound, Euro and Aussie all lose over 3 cents in that time.
Earlier in the evening we had a surprise fall in unemployment in the UK, with the rate moving down to 7.8%. The release saw the Euro fall against the Pound by around 30 pips in the ensuing minutes and see the pair hits lows of 0.8435 Euros. The release also halted the last 7 days of falls the Pound has had against the Aussie dollar, it’s now buying 1.5227 AUD after buying 1.558 AUD on the 9th of May.
Crude oil managed to avoid an aggressive sell off overnight with negative US inventories seeing the WTI index recover the 2 dollars it lost yesterday to shoot back to 94.15 USD a barrel.
Looking a little closer to home, although we don’t have any domestic data up for release we have a host of regional data out. We have Preliminary GDP data for Japan with expectations for a 0.7% quarterly rise and then a few hours later the New Zealand budget is released. The approach of the Mr Key’s government should be interesting in comparison to our own as the Australian dollar is back below 1.20 NZD again this morning.
The Australian dollar has opened this morning above parity but slightly below Friday’s close of 1.0018 USD. The rest of the major pairs have opened within about 10 pips of their close price from Friday and there has been very little activity and volume in the first hour of trade after a quiet weekend of economic developments coming out of the G7 meeting.
Friday evening’s session was driven by US dollar strength, and we did see the Australian dollar drop to lows of 99.6 US cents before it firmed slightly to the close. With rates cut and a budget to be fully announced on Tuesday the Aussie had few friends last week dropping over 3 cents. Another weaker performer was the Canadian dollar, which struggled after the unemployment rate was unchanged at 7.2%. The US dollar was buying around 1.006 CAD before the announcement before it finished up at 1.0106 CAD for the week.
Looking forward to today’s session we are not expecting much of an increased volatility to what we have seen this morning. We have some mid-tier data our domestically including Nab Business Confidence and New Home Loans which is expected to increase for the second straight month. We we’ll also have Chinese data out later in the afternoon, including industrial production, although we expect currency markets to really kick into gear with US retail sales data is released later tonight.
Federal Reserve Bank of Philadelphia President Charles Plosser began to make an early play to become the next Federal Reserve Chairman a few hours ago by publicly trying to influence the next FOMC meeting. With Bernanke’s term to end in 9 months, Plosser’s comments favouring the scaling back of stimulus at the next FOMC meeting saw dramatic support for the US dollar overnight. The Australian dollar was a major loser, falling to 1.0046 USD, before recovering about 50 pips in the last couple of hours. And notably the US dollar broke through the 100 Yen mark, trading up to 100.79 USD an ounce, which gives the US dollar every chance of hitting 110 Yen this year if we see QE wound down early.
Earlier in the evening yesterday we had a continuation of recent positive UK data with both manufacturing and industrial production outperforming expectations at 1.1% and 0.7% respectively. It helped the pound touch highs of 1.5587 USD before the selling began in the US session with the Pound eventually hit lows of 1.5426 USD this morning.
The Australian dollar is finding some support as there is a lot of water to go under the bridge before the next FOMC meeting on June 18th. We are currently a few pips shy of 1.01 USD with the RBA Quarterly Monetary Policy statement out at 11.30am. We have a full night of news coming up with Canadian unemployment data, a G7 meeting and a speech from Ben Bernanke later tonight.
German data again was a major driver for the Euro with Industrial production increasing by 1.2% month on month. Expectations were for a slight contraction and this again sparked buying for the Euro which unlike yesterday was more sustained, it pushed up to 1.319 USD before retreating about 30 pip in the US session. The Kiwi dollar also appreciated after yesterday’s extensive falls after RBNZ Governor Wheeler announced they had been selling to limits its appreciation. The Aussie dollar managed to claw back half a cent to 1.209 NZD, whilst the NZD began to rise against the greenback piking back up about half what was lost yesterday morning.
The US session was marked again with equities on the rise with the S&P 500 up 0.41% wand we did see a bit of US dollar weakness in the during the session. Gold strengthened for most of the night and has picked up $20 in the last 24 hours to be now at 1472.35 USD and ounce.
Moments ago the New Zealand unemployment data was released with the unemployment rate dropping from 6.8% to 6.2% really outperforming expectations. The Aussie is now back to 1.2043 NZD, picking about nearly 50 pips post release and the NZD is back to 0.8462 USD were it was before Wheeler’s comments yesterday.
It will be Australia’s turn to release Unemployment data in the next few hours with expectations for it to remain at 5.6%, although the unemployment change by recent data could be anyone’s guess. At the time of writing the Australian dollar is at 1.019 USD jumping up 17 pips of the back of the New Zealand unemployment release.
The kiwi, one of the best performing currencies this year had a dour session today as the RBNZ sold its domestic currency. Wheeler announced that the kiwi was sold in order to protect economic growth and would do so again if needed. With a large portion of growth for the small nation coming from exports, its very important that the currency does not become overvalued as it will harm growth and international competitiveness. There have been threats regarding intervention previously however with action having taken place it could dampen demand in the long run any time the currency approaches the area of 0.855USD. Eyes will continue to be on the kiwi tomorrow as it releases its QOQ employment data which can vary wildly from expectations.
The Aussie attracted some buyers as equity markets were lifted as Chinese trade balance beat estimates. Chinas trade surplus of 18.2B passes expectations of 15.5 from economists causing a risk on session leading to the Aussie to sit back at 1.019. Traders may be expecting demand to continue to rise into the European session as positive sentiment from this release continues to drive markets.
There are no large important releases this morning therefore less important announcements such as German Industrial production will drive markets. German factory orders last night buoyed the euro overnight before sellers rushed back in on the premise that an aggressive ECB may cut rates further and possibly looking at unorthodox methods for attracting investment and growth in the Euro-region. Should the Industrial data come in strong either side of expectations it could prove a market mover.
The Australian dollar had a muddled slide through the European session following on from yesterday’s rate cut, hitting lows of 1.0155 USD before it was able to eek back to 1.0184 USD this morning. Short term support for the Euro was sparked off after German factory orders came in at 2.2% when a minor contraction was expected. The Euro shot up over 50 pips to 1.3132 USD before it dropped back to where it risen from as the US session began back to 1.307 USD. Surprisingly the Australian dollar was well supported against the Kiwi, after the initial drop after the rates cut it gained all through the night putting on 70 pips to be back up to 1.2054 NZD, the quite a large reversal following the last 7 week downward trend.
The uncorrelated currency session continued to with US equities posting solid gains of over 0.5% but the US dollar also did then weaken against the Yen down to lows of 98.64 moments ago. Whilst is strengthen against the Yen, the US dollar continued to slide against the Canadian dollar as it approaches parity mark last reached in early February as it hit 1.0036 CAD overnight.
Although we don’t have any local data up for release today we will have Chinese trade balance data up at some stage today. Market expectations may likely not be a good guide for the actual release if we go off the last two releases which were well away from estimates; median forecast is a 15 billion surplus. As we begin the local session today currency markets are steady, continuing on from a quieter end to the US session.
Yesterday’s softer retail sales figure weighed on the Australian dollar overnight as it slumped down to a low of 1.0222 USD, dropping just under a cent through the last 24 hours. And the Aussie continued to lose ground against the Kiwi, now down 6.4 cents in the last 7 weeks as pressure builds for the RBNZ rates is rise versus the RBA today who are unlikely to cut at today’s meeting. The Euro also slipped lower overnight as the ECB’s Draghi signaled that they could cut rates again if there is no economic improvement. It slipped about 50 pips down to 1.305 USD, although we did have a bright light in Spain’s unemployment falling by 46,500 which see their overall unemployment rate tick down by 1%.
US equities began the week in the black with the afterglow from Friday’s NFP figures maintain support in the asset class. The US dollar was stronger against the majority of peers through the US session, it rose up to 99.38 yen moments ago, steadily on uptrend against the Yen in the last 24 hours. The exception was the Canadian dollar which saw an 8.6% rise in building permits which pushed the US dollar to slip down to 1.0064 CAD.
Today’s session will start off with trade balance with expectations for a marginally positive export net, after that all attention will focus on the rates decision. Rates are anticipated to remain at 3%, although they will remain a focus this week with Thursday’s employment data a likely trigger for any subsequent cut next month.
This morning’s open on currency markets has been muted after the extensive moves on Friday. The Australian dollar is just below 1.03 USD after closing about 16 pips higher than that mark on Friday. We do have a few local releases this morning which should spark some activity; the MI inflation gauge is expected to show that inflation in not a pressuring factor in the Australian economy. It is followed by retail sales data which is expected to show a growth of 0.2% for the month of March. The release is reasonably hard to forecast with the actual print often well away from economists’ median expectations, likely to increase volatility from 11.30 am onwards with AUD pairs.
Friday’s non-farm payroll figure will continue to reverberate through today’s open on local equities after a surprising outperformance. With 165,000 new jobs created and the unemployment rate dropping to 7.5% the lowest in five years, on track to hit the fed’s 6.5% target in late 2014 where it will look to tighten monetary policy, although the date where QE ends still remains the markets biggest focus. The release saw the Australian dollar improve 60 pips to the close on Friday, the US dollar jumped from 98 to 99.18 Yen.
The slow start to this morning’s currency trade is definitely not a precursor to this week’s activity with this morning releases followed with both trade balance and rates decision tomorrow afternoon. CPI and unemployment data follows on Thursday giving traders a pretty accurate picture of the state of the Australian economy.← Older posts