What Tone Will the RBA Set Today?
AUD
Public holidays in the UK and the US meant that currency markets were subdued yesterday. Despite this, the AUD managed to make some minor gains across most major currencies minus the NZD. US Equity Markets which have given recent direction to the strength of the AUD, were all flat. The same could be said for commodities, all lacking inspiration with Gold +0.0%, Iron Ore +0.1%, and Copper down -0.2%. Australia’s biggest customer China released their Manufacturing PMI for May yesterday, coming in at a level of 51. Demand remained strong in May due to the reopening and recovery of some nations such as the US and UK, but recent strong commodity prices are placing pressure on the profitability of companies, especially those that purchase raw materials. Domestic markets are likely hesitant in anticipation of the RBA’s Rate Statement at 2:30pm today. It’s unlikely that the RBA will move the cash rate but markets are looking to see if the they will adopt more hawkish tone given buoyant economic conditions, and movers by other central banks to signal considerations around rate hikes and stimulus tapering.
USD
The AUDUSD re-establishing itself into the .77s after falling into .76 territory in recent days, climbing to 0.7743 at time of writing. Memorial Day in the US meant that there was no economic data from the US overnight, but the slow start to the week will come to an end with US ISM Manufacturing PMI being released at midnight tonight, and an even bigger data dump including ADP Non-Farm Employment Change, Unemployment Claims and Average Hourly Earnings m/m, closer to the end of the week.
EUR
The AUDEUR trading just marginally higher after giving back some of the earlier gains to trade at 0.6330 this morning. European equities are sitting weaker with losses of a little over 0.5% for the CAC, DAX and IBEX indices. Recent strength in the EUR likely attributed to the increasing improvement in conditions in the Eurozone, with German Chancellor Angela Merkel conveying an upbeat position on Covid rates and vaccines. She was quoted saying “On Monday, Germany had 35.1 cases per 100,000 people over the past seven days, the lowest level since mid-October. As of Sunday, 43% of the population had received at least one inoculation against Covid-19.” This afternoon will see some Final Manufacturing PMI’s, with France, Italy, Spain, and Germany all notable in release.
GBP
The AUDGBP also sitting just above the levels seen yesterday morning to trade at 0.5445 at time of writing, despite the bank holiday in the UK. With the banks closed, all economic data releases were put on hold, with a few data releases trickling in over the next 24 hours before BOE Gov Bailey speaks bright and early at 1am tomorrow.
NZD
The AUDNZD is sitting steady at rates seen yesterday to trade at 1.0640 this morning. The ANZ Business confidence fell in the final read for May against the preliminary estimates, though there was no obvious driver underlying the fall in confidence. Other than the RBA meeting today, Australian and Kiwi Building Permits are the only other catalyst that could entertain currency markets today.