Local Markets Await RBA Meeting Tomorrow
AUD
Despite a number of usually supportive indicators being in its favour, the AUD lost ground against most major currency pairs over the weekend (expect for the NZD). US equities claimed their 4th straight month of gains last Friday as the US heads into Memorial Day Long weekend. However, the slight gains on Friday weren’t enough to push the AUD higher, despite the recent correlation between US Equities and the AUD. Commodities also performed well, with Iron Ore most notably making gains of 2.2%. This also failed to give the AUD strength, despite local exports being so heavily dependent on this commodity for overseas steel production. China’s PMI data is scheduled to be released today, with specialists speculating the data to remain robust, as the manufacturing sector continues to benefit from strong external demand. China’s vaccine rollout has been increasing its pace since mid-April, but there has been some Covid case outbreaks in three provinces, which could depress risk sentiment. Looking further ahead this week, tomorrow's RBA meeting will be keenly observed; will they follow the lead from the US Fed and the RBNZ which last week ramped up the rhetoric around potential tapering and/or interest rate hikes?
USD
The AUD/USD moved slightly lower over the weekend, coming in at 0.7712 at time of writing. US Equities finished slightly in the green with the NASDAQ and S&P500 both gaining 0.1%, this marks the 4th straight month in a row where US equities have made gains. However, this failed to give the AUD strength moving into the weekend. US Core PCE, which is a measure of price changes for goods and services excluding food and energy, beat expectations coming in at 0.7% MoM (vs exp 0.6%) and 3.1% YoY (vs exp 2.9%). The US Personal Income change data also beat expectations by only losing -13.1% (vs exp -14.2%). The Chicago PMI for May printed at 75.2 (vs exp 72.1), which is the highest result since November 1973. Looks like a quiet start to the week for the USD with a bank holiday today (Memorial Day). Looking ahead and Friday night's employment report will be the highlight for the week Stateside.
EUR
The AUD/EUR also lost some ground, currently trading at 0.6323 at time of writing. European Equities also moved into green territory, most notably with the DAX and CAC Indices both gaining 0.7%. Along with EU confidence data also coming in better than expected these could of added to the strength of the EUR. Light day of data for the EUR, with just some German and Spanish CPI data being released. Markets could move if the result is greatly different than expectations.
GBP
The AUD/GBP following the common trend by also taking a step back, currently trading in at 0.5433. Fear may continue to increase within the UK as new data reveals that 75% of all new Covid cases could be from the Indian variant strand. Markets will continue to watch as the situation unfolds, hoping that the UK doesn’t follow in India’s footsteps. AUD is now at 6 month lows against the resurgent GBP however there's a chance of some recovery if the UK's roadmap out of lockdown is forced to take a step back as a result of the latest surge in cases. A quite day for the GBP on the data calendar, with the UK also on a Bank holiday.
NZD
The AUD/NZD being one of the only major currency pairs trading slightly higher, currently trading at a rate of 1.0645 at time of writing. New Zealand has decided to back Australia in regards to the barley dispute with China, hoping that the discussions with the WTO panel will result in a reduction or removal of the subsequent tariffs. Not much on the books for the NZD as well, with just the Final ANZ Business Confidence data being released later this morning.