Good Morning from our office in Canary Wharf ( London);
give a look of the Week Ahead for Fx Market.
As we head into the first full week in June, central bank meetings, key economic data, elections and global terrorism atrocities continue to dominate global markets.
The AUD bounced higher against the USD in late trade last week following a weaker than anticipated US jobs report. The AUD had come under pressure following soft Chinese manufacturing data earlier in the week that showed contraction in the sector. Having fallen lower into the 0.7300 region against the USD last week the AUD rebounded to open this week around 0.7430.
The 138k new jobs recorded in the US in May could serve to impact the Federal Reserve’s expected interest rate hike next week. Australian data is spread theroughout the week with trade balance, GDP and current account due for release. The RBA interest rate decision on Tuesday will be closely watched with the tone of the accompanying statement likely to be of more importance than the expected rates on hold decision.
It is a short business week in New Zealand with the Queen’s Birthday Holiday on Monday. Commodity price data and manufacturing sales figures are the main releases for the week whilst the GlobalDairyTrade Auction midweek will be interesting for the New Zealand economy. Will the recent string of four consecutive price rises be maintained?
It is largely anticipated that the US Federal Reserve will next week increase interest rates again despite some softer economic data in the past week. A June hike has largely been priced in already and a rates on hold decision would be a surprise outcome despite recent data. Softer US data does, however, provide food for thought for the Fed for its anticipated trajectory of interest rate hikes. This data may alter its preferred course although some Fed members have publicly outlined their support for three rate hikes this year despite recent data.
The EUR has strengthened over the past week and this has been fueled in part by speculation that the ECB may provide a more positive outlook for the eurozone at this week’s monetary policy meeting. ECB President Draghi has in recent times noted that weak inflation is a reason to maintain the current quantitative easing settings. There is, however, an expectation across global markets that this week’s meeting may see the use of more positive language in the accompanying monetary policy statement and this could serve to bolster the EUR.
The British General Election this week has unfortunately been overshadowed by another terrorist atrocity this time in London. Whilst there have been some calls for the election to be postponed this is unlikely to occur. What started as a seeming landslide victory for the ruling conservatives when the snap election was called now appears to be a much closer fought contest. Whilst there is a raft of economic data due for release the recent terrorism events and the election will no doubt dominate the week ahead in the UK.
Chinese data this week will be closely watched following the contraction of its manufacturing sector last month. Caixin Services PMI kicks off the week on Monday with Trade Balance, CPI and PPI following later in the week. Japanese data this week is evenly spread with GDP the main headline on Thursday.