Tariff Gloom Weighs on US Manufacturing
AUD
The AUD floats higher against most majors off the back of a weakening US Dollar, driven lower by soft data, fueled by uncertain tariff policy. Commodities finished higher as well, with Oil gaining 3.8%, Nat Gas gaining 2.3%, Gold up 0.2% and Silver up 0.7%. Copper also was up big at 3.8% with only Iron ore down 0.2%. Asian equities were soft into the close, with the ASX down 0.2%, and SHANGHAI COMP down 0.5%. MI Inflation gauge m/m fell to -0.4% from 0.6%. ANZ Indeed Australian Job Ads dropped 1.2% in May from April to its lowest level since May 2021. Today at 11:30am we will see the RBA's minutes for its May 20 meeting. This meeting saw a 25bp rate cut and communication indicated much greater comfort with the inflation outlook. In China, the Caixin Manufacturing PMI will be released where the consensus expects a moderate improvement from 50.4 in April to 50.8 in May. The Business Conditions Index, a leading indicator of PMIs, only showed a modest uptick from 50.1 in April to 50.3 in May. This suggests that corporations are still cautious about the business outlook despite the de-escalation of the trade war.
USD
The AUDUSD opens the day higher, with the pair gaining over half a cent, running up against the 0.65 barrier overnight, opening this morning at a rate of 0.6498. Wall Street saw a mediocre rise, with the DOW JONES closing up 0.1%, S&P 500 up 0.4% and NASDAQ up 0.7%. U.S. ISM May Manufacturing Data printed mixed, with the manufacturing sector contracting for a third straight month in May, while suppliers took the longest time in nearly three years to deliver inputs amid tariffs, potentially signaling looming shortages of some goods. The Headline figure was weaker 48.5 (cons. 49.5), with Price Paid slightly surprising 69.4 (cons. 69.3). New Orders were 47.6 against 47.2 prior month, while Employment was 46.8 against 46.5 in April. Of note, export orders fell to a five-year low of 40.1. The uncertainty of the Tariff policy in the US has shown to slow the US manufacturing segment, with many “sitting on their hands” till there is a clear direction with the policy, causing a cooling effect on the economy. Overnight, we also heard Fed Chair Powell speak, making no comment on the economy. Tonight, will see the JOLTS Job Openings, looking to remain largely unchanged, expecting to lower 0.08M to 7.11M.
EUR
The AUDEUR saw minor gains since yesterday’s open, the pair is keeping within tight range, opening this morning at a rate of 0.5675. European equities saw mild losses, with the DAX closing down 0.3% and the CAC down 0.2%. Yesterday saw Final Manufacturing PMIs release out of Europe, with the Eurozone’s remaining unchanged at 49.4, with German, French, Italian all remaining contractionary as well (below 50). Spanish alone unexpectedly was expansionary, gaining 2.4 points to 50.5. Tonight, will see CPI Flash Estimate y/y, with the headline expected to drop 0.2% to 2%, and the Core expected to read 2.4%, down 0.3%.
GBP
The AUDGBP saw steady gains in the past 24 hours, with the pair climbing to a weekly high overnight, opening this morning at a rate of 0.4794. It was an unremarkable day in British equities, with the FTSE finishing the day flat. Last night saw Final Manufacturing PMI rose to 46.4 from 45.1, but still deep in contractionary territory. Tonight, will see the Bank of England Monetary Policy Report Hearings, which may shed light into the future rate decisions, seeing how the Members view the current state of the economy.
NZD
The AUDNZD fell since yesterday morning, hitting a hear 5-week low overnight, opening this morning at a rate of 1.0745. It was a bank holiday for NZ yesterday, with this morning seeing the Overseas Trade Index q/q falling to 1.9%, previously 3.2%. Nothing further out today.