Strong Retail Sales Boost AUD

AUD

The Aussie opens higher against the majors after posting strong retail sales yesterday (doubling market expectations), before continuing to inch higher in the overnight session with weak US jobs and services data overnight. Retail Sales m/m rose 0.6% in May, beating market expectations for the first time since January, leading to increased talks of an RBA hike. Aussie Building Approvals were also strong in May - being up 5.5% and well above market expectations due to an uplift in apartment approvals, also potentially altering the outlook of our RBA to a more hawkish stance. These strong figures were slightly dulled by weaker Chinese service economy figures, with the Caixin Services PMI printing at 51.2 against an expected 53.4 (the lowest expansion in 8 months). Commodities had a mostly strong day, with Crude Oil +1.2%, Gold +1.1%, Silver +3.0%, Iron Ore +0.3%, Copper +2.4% and just Natural Gas finishing in the red at -3.5%. The ASX rose +0.3%, pulled higher by IT and materials, whilst Asian equities finished mixed, with Nikkei +1.3%, Hang Seng +1.2% and Shenzhen down -0.2%. Locally it will be quiet for the remainder of the week, with just our Goods Trade Balance at 11:30am today, where we are expected to have exported 6.20B more than imported for the month of May.

USD

AUDUSD opens at a strong 0.6708 after briefly hitting 6-month highs of 0.6735 overnight, after US saw weaker than expected jobs and services data overnight, leading to increased rate cut bets from the Fed Reserve. Last night ISM Services PMI came in at 48.8 against an expected 52.6, showing service sector slowdown and an overall cooling economy. ADP Non-Farm Employment Change also showed just 150K private jobs added against an expected 163K, showing a cooldown in their labour market as well. FOMC Meeting Minutes also released with little new information, revealing the Feds saw inflation moving in the right direction, however still requiring greater confidence before having a definitive case to cut rates. US equities had a mostly strong day, most notably with the S&P 500 +0.5%, hitting all-time highs whilst setting its 33rd record closing high this year. NASDAQ closed +0.9% and Dow Jones -0.1%. No data from the US tonight the Independence Day 4th July holiday.

EUR

AUDEUR opens higher at 0.6216 off the back of our strong Aussie figures yesterday, with little mismatch between reality and expectations from the services economy figures out of Europe last night. Last night we saw expansionary figures from Services PMIs out of Italy and Spain (although with little deviation from expectation and little effect on the markets), whilst French and German Final Services PMI also showed a similar story, both in expansionary territory in line with expectations. Overall this was encapsulated by the Final Services PMI for Europe, coming at 52.8 against an expected 52.6, although now sitting at a 3-month low to show some cooling economic growth in Europe. ECB President Lagarde was also on the wires showing confidence in returning inflation to the ECB’s 2% target, albeit with some bumpy paths to take. Euro equities had a strong day, with the DAX +1.2% and CAC +1.2%. Looking forward we’ve got German Factory Orders and ECB Monetary Policy Meeting Accounts due for release tonight.

GBP

AUDGBP opens higher at 0.5262, following the general upside trend due to our Aussie data, however strong services figures from the UK held the AUD at bay to a degree. Yesterday alongside the rest of Europe, the UK had their Final Services PMI print at 52.1 against an expected 51.2, to show continuing strength of business activity to finish off the second quarter, albeit with a little momentum lost. UK equities saw an uptick to gain +0.6%. The main event will be their Parliamentary Elections today, with increasing market volatility leading up to it due to heightened risks of uncertainty throughout. Tonight we’ll have their Construction PMI at 6:30pm, expected at 54.0 as their construction sector continues the trend of beating expectations since the beginning of the year.

NZD

The AUDNZD continues to grind higher, flirting with the 1.10 barrier early this morning to hit a 2-month high, opening at a rate of 1.0991. Yesterday ANZ Commodity Prices m/m came in higher at 1.5%, previously at 1.1%. There is no further news for the week, with next Wednesday’s rate decision being the next piece of key data.