Currency Update - Friday 31st May 2019

AUD

The AUD couldn't break through resistance at 0.6940 yesterday, briefly falling below 0.69 overnight, before recovering to open at yesterday's levels. This was surprising considering Private CAPEX (-1.7% v's 0.5%) and Building Approvals numbers (-4.7% v's 0.1%), potentially setting up a weak Q2 GDP release the day after the RBA's rate decision on Tuesday.  Risk sentiment improved slightly overnight, SPI futures improving to slow the stock fallout to just -1% for the month, far better than the S&P, which fell -5% on the month.  The U.S/China trade deal is becoming more protracted, weighing on the AUD's appeal.  Oil price and other commodities came under selling pressure, meanwhile the U.S released positive data, the USD index remaining above 98.00 to keep pressure on the local unit.  Chinese PMIs released later this morning will be important for direction heading into the weekend.  If equity investors take profits before end of month the AUD could well come under further selling pressure this afternoon.  All in all it was a quiet week for AUD volatility. Technicals remain the same, support at 0.6860 resiatance at 0.6940 & 0.6970. 

USD

U.S bond yields continued to drift lower overnight, a sign that all is not well in the minds of bond traders in respect to how they see the health of the U.S economy, future negative interest rate risks remaining high.  Despite this stocks posted their first gains of the week, the S&P up 0.3%.  Q1 GDP beat expectations of 3.0% to print 3.1%, Personal Consumption beat expectations by 0.1% also, Core PCE was revised slightly down, Wholesale Inventories posted a big beat at 0.7% (0.1% exp).  There was little reaction to the data above, Housing Stats spoiled the positive data run somewhat, containing the USD's advances.  Eurodollar fell, so too GBP/USD.  The Fed's Clarida said the economy was in a good spot and that low inflation was temporary, but that a rate cut could be required later in the year.  Vice President Pence upped the trade war ante a little by saying the U.S could more than double existing trade tariffs on China.  China is still threatening the U.S with restriction of rare earth minerals, the U.S acconts for over 85% of China's exports.  Chicago PMI, April PCE Core Deflator, Personal Income and Spending are released this evening.   

EUR

Spanish CPI fell short of expectations for the year printing at 0.8% (1.2% exp), whilst Retail Sales grew at 2% y/y.  Eurodollar flirted with a break of 1.11, AUD/EUR is flat at 0.6207.  Salvini was waxing lyrical and threatening the breakup of his colatilion party if he doesn't get what he wants from the EU.  The Euro struggled, equities fell initially but caught a bid before the end fo the session to close nicely in the black.  Germany CPI for the month of May is released this evening. 

GBP

GBP/USD clings to 1.26, AUD/GBP opens unchanged.  Data was lacking overnight, the AUD managed to hold onto recent gains despite poor private capex and building approval numbers released yesterday.  Tonight sees the release of second-tier data from the U.K.  Brexit headlines are likely to keep the pressure on Sterling.  Next week's RBA rate cut and GDP numbers will be crucial for the performance of the local unit. 

NZD

The Kiwi didn't escape USD strength overnight, falling again to a low of 0.65.  AUD/NZD remains in a tight range.  Next week is an important one for AUD direction, the RBA are likely to cut interest rates to bring them in line with that of the RBNZ at 1.5%.

Today’s data

USD:

  • April PCE Core Deflator, Personal Income & Spending

EUR:

  • German CPI

CNY:

  • May CPI 

FX Corp