USD Off the Boil as AUD Reclaims Losses

AUD

The Aussie dollar has appreciated across the board off the back of positive local data yesterday & mixed figures coming out of the US overnight. As Chinese Banks were on holiday, local data had to carry the momentum off of Wednesdays’ local GDP outperformance. This began yesterday morning with Retail Sales figures for the month which matched expectations at 0.9% however it was the monthly Trade Balance data which outperformed expectations by almost AUD 1B printing 10.50B. Equities however did not reflect the positive sentiment where the ASX ended 0.8% lower as tech stocks fell. Asian equities followed suit with the Nikkei down 0.16% and Hang Seng losing 1%. Commodities on the other hand fared much better with both Iron Ore & Copper closing up 1% & 5.3% respectively. Looking ahead, there is no news of note released either locally or in China, however there is a slew of Tier 1 data coming out of the United States tonight which includes Non-Farm Employment Figures. Time will tell if the actual report will reflect the underperformance outlined in the ADP report released yesterday (see below). As the US figures tonight will cause markets to mobilize, Monday will provide a brief respite before the RBA meets on Tuesday to determine if they will act on their hawkish rhetoric and raise interest rates again.

USD

AUDUSD comfortably cleared the 72c handle overnight off the back of poor US data, surging to 0.7265 this morning. There was a slew of mixed US data yesterday which ultimately worked to the USD's detriment, beginning with the US ADP Employment report for May which printed at 128k, down from a negatively revised 202k and well short of expectations of 300k. Released shortly afterwards and weekly jobless claims data was modestly better than expected with initial claims at 200k compared to forecasts of 210k while continuing claims were 1.309 million compared to forecasts of 1.340 million. These figures allowed AUD to capitalise through the overnight session to the tune of about 1 cent. Despite the lackluster news, US equities performed well where the NASDAQ closed +2.5% while the S&P 500 finished the session +1.7%. Looking ahead there is healthy amount of Tier 1 data being released tonight which includes the Non-Farm employment data. If last night's ADP preliminary figures are any indication of the official employment data tonight, then perhaps another evening of USD weakness is possible. There will be a speech by FOMC member Brainard to round out the session but no doubt the employment  figures tonight will give ample reason for market movement going into the weekend.

EUR

AUDEUR opening 20pips higher this morning at 0.6760 after dipping sharply to 67c yesterday afternoon. Although Italian banks were on holiday there was plenty of news to keep markets busy yesterday. This started with Spanish Unemployment data which outlined a 100k reduction in unemployed people from last month. This was followed by Eurozone PPI figures which printed a paltry 1.2%. The lack of news didn’t deter equities with the DAX & CAC closing up 1% & 1.3% respectively. Looking ahead there is plethora of low-level Services, Manufacturing & Sales figures coming out of Europe which will be kicked off with German Trade Balance data. This will be followed by Spanish, French, German & Italian Services’ PMI & monthly Eurozone Retail Sales figures to round out the session. Although there is a healthy sum of Euro data, the release of the release of Tier 1 figures in the US tonight may also flow into Euro’s movement (see above).

GBP

AUDGBP opening a modest 40pips higher off yesterday’s open at 0.5777 this morning. Like Italy, British Banks were also on holiday and there was no data of note yesterday. British equities performed poorly relative to their European counterparts with the FTSE closing down 1%. Looking ahead, UK banks will still be on holiday and there is the chance that the flow of Eurozone news may translate into momentum for the pound however it is more likely that the data coming out of the US tonight will have a more tangible impact (see above).

NZD

AUDNZD finding itself in familiar territory at 1.1077 this morning, a point at which the pair has failed to break past throughout May. There was no data of note coming out of NZ yesterday and there is no data to look out for today. As NZ banks will be on holiday on Monday, the pair will defer to the data being released in the US tonight to act as a catalyst for movement (see above).