USD Weakens Ahead of Jobs Report Tonight
AUD
The Australian Dollar opens flat / a little higher against major currencies. This stability follows a modest 0.2% rise in May Retail Sales, falling short of the anticipated 0.4%, marking the fourth consecutive month of subdued consumer spending. The data underscores persistent weakness in household consumption. This persistent weakness in household consumption has led all four major Australian banks to anticipate a 25-bps interest rate cut by the Reserve Bank of Australia (RBA) in its upcoming meeting on Tuesday. The AUD’s performance is also being shaped by easing geopolitical tensions—most notably the ceasefire between Israel and Iran, along with emerging discussions of a potential ceasefire in Gaza. These developments have improved global risk sentiment and lent support to risk-sensitive currencies like the AUD. Asian equities closed yesterday mixed with the Nikkei -0.5%, Hang Seng +0.6%, and Shenzhen flat. The ASX 200 performed strongly +0.7% as materials and real estate lead gains. Attention is also on the anticipated U.S. tariff announcements next week, which could serve as a key directional catalyst—particularly for USD-linked pairs.
USD
The U.S. Dollar continues its downward trend, with the AUDUSD pair opening slightly higher at 0.6587. This movement reflects ongoing concerns over U.S. economic policies and geopolitical tensions. Federal Reserve Chair Jerome Powell recently indicated that rate cuts might have occurred if not for inflationary pressures stemming from tariffs imposed by the Trump administration. Additionally, the U.S. Senate's recent passage of a significant tax-cut and spending bill adds to the economic landscape's complexity. The technology sector outperformed overnight and saw the Nasdaq close +1%, the S&P 500 +.4%, and the Dow Jones unchanged on the day. Overnight, ADP Non-Farm Employment Change printed at -33k, well-short of +99k expectations, suggesting the economy lost jobs for the first time since 2023 due to trade wars. The decline in employment indicates there hasn't been any improvement in a softening labour market even after the Trump administration in May dialed back the most extreme tariffs. Tonight's Non-Farm jobs report will include the Bureau of Labour Statistics' measure f employment change, earnings change as well as the Unemployment Rate. This data tends to draw more attention than the ADP release.
EUR
The Euro remains resilient, with the AUDEUR pair opening flat at 0.5580. The Euro's strength is bolstered by its status as a preferred safe haven amid global uncertainties. European Central Bank (ECB) President Christine Lagarde recently reiterated the commitment to combating inflation, emphasising that while progress has been made, inflation remains too high. Investors are awaiting further insights from the ECB's monetary policy meeting accounts and upcoming speeches by ECB officials. Additionally, ECB policymaker Olli Rehn has advocated for joint European defence investments, suggesting that such initiatives could bolster the euro's global role. The DAX gained +0.5% and the CAC gained 1% yesterday. No heavy-hitting Eurozone data for the remainder of the week.
GBP
The British Pound has weakened off the back of political uncertainty in the UK, with the currency pair opening at 0.4824. The market remains cautious amid UK political developments and fiscal outlook concerns. Bank of England (BoE) Officials have acknowledged risks to the UK's economic stability, with particular attention on potential changes in fiscal policies. No major economic data releases are expected today, but investors will monitor any BoE commentary, especially from Governor Andrew Bailey, who is scheduled to speak again on Sunday.
NZD
The New Zealand Dollar is under slight pressure, with the AUD/NZD pair opening slightly higher at 1.0810. This movement follows a 4.1% drop in dairy auction prices, a key export commodity for New Zealand. Market participants are awaiting next week's Reserve Bank of New Zealand (RBNZ) Official Cash Rate decision and accompanying rate statement, which are expected to provide clearer guidance on the central bank's policy trajectory. Until then, traders are likely to stay cautious and range-bound.