European PMIs Tonight Pivotal for USD Demand
AUD
The Aussie Dollar managed to survive weaker commodity prices to make minor gains against most pairs overnight. Iron Ore, Copper, and Gold all took losses though still maintaining historically high prices, losing -1.0%, -1.0%, and -0.3% respectively. What's likely to have helped the AUD was increasing risk-on sentiment and improving US Equity Markets that struck back after a few weaker sessions, with the NASDAQ gaining +1.7%, Dow Jones up +0.6%, and the S&P 500 +1.0% higher. Yesterday’s Aussie employment data was mixed with Total Employment decreasing by 30,600 jobs, against an expected gain of 15,000 jobs for April. Despite the miss, the Unemployment Rate dropped to 5.5%, down from 5.7% in March, though the participation rate dropped from 66.3% to 66.0%. Looking forward, it’s a relatively quiet day today on the domestic data front with the highlight being the ABS’ Retail Sales Report m/m, with expectations for the preliminary figures for April to show a small decline of ~0.5%.
USD
The AUDUSD finding some strength overnight but still remaining within the familiar territory of the .77s, trading at 0.7773 this morning. The AUD recovered from US FOMC Minutes-led risk aversion wave, which propelled the US dollar on Wednesday and weighed on the AUD. US Weekly Jobless Claims were mixed with initial claims at 444k, down from 478k and better than expectations of 450k though the total number continuing claims rose to 3.751 Million, up from 3.640 Million and worse than expectations of 3.602 Million. Also released yesterday was the Philly Fed Manufacturing Index for May, a survey of businesses outlook on economic conditions, which fell to 31.5, down from 50.2 and much lower than expectations of 41.5. Along with big European economies, the US will release their Flash Manufacturing PMI for May later on tonight, with forecasters expecting a slight decline from 60.5 to 60.
EUR
The AUDEUR trading in tight ranges overnight to sit at 0.6355 this morning. European Equities rose in the overnight sessions, as strong earnings in the chip sector helped investors look past inflation worries, with the FTSE, DAX, and CAC all making strong moves to gain +1.0%, +1.7%, and +1.3% respectively. The lack of action here could be traders sitting on their hands in anticipation of the data dump out of Europe today; as we see Flash Services and Flash Manufacturing PMIs from powerhouses Germany and France, and Europe as a whole. We’ll also see ECB President Lagarde speak at a press conference following the Eurogroup Meetings, in Lisbon. Could be a busy day ahead if results vary from expectations and could rub off on AUDUSD if EUR demand attracts investors that would ordinarily be piling into USD.
GBP
The AUDGBP made minor gains overnight to trade 0.5478 this morning. Little data out of the Brits yesterday, but concerns amongst the growing overall vaccine optimism after a glitch in the UK’s test-and-trace system may have helped fuel the spread of a highly-transmissible Indian Covid variant in one of the worst-hit towns, Blackburn. Data from Public Health England (PHE) shows there have now been 3.424 confirmed cases of the variant, up from 1,313 cases confirmed last Thursday, a rise of 160% in a week. This afternoon the Brits will release their Retail Sales data for April, and later on they will also join in on the rest of the party releasing their Flash Services and Manufacturing PMIs.
NZD
The AUDNZD pushed forward overnight to trade just shy of 1.08 this morning. The Kiwis released their Annual budget yesterday, with New Zealand Finance Minister Robertson saying, “Long-term effects of pandemic not as severe as previously thought”. The key financial statement upwardly revised the GDP forecast from its Half Year Economic Forecast Update while also expecting a gradual reduction in the fiscal deficit. Robertson also offered some optimism, hoping for more borders opening in 2022. No major data out of NZ today, with currency markets having to wait till Monday for Quarterly Retail Sales which could inspire movement.