Summary: The Dollar weakened against all its rivals after last month’s Fed meeting minutes revealed that policymakers re-upped a pledge to keep interest rates near zero. Officials agreed that a recovery in the US economy could be slower than initially thought. It was risk-on once again as optimism rose on the return of businesses due to lifting of lockdown restrictions from the coronavirus. Markets moved ahead of yesterday’s vaccine test failure with global attempts to find a cure for coronavirus is ramped up. Which further took away safe-haven support from the Greenback. The Euro climbed to a two-week peak against the Dollar at 1.0999 (1.0925 yesterday) before easing to finish at 1.0977 in New York. A recently announced proposal from France and Germany for a common fund, seen as moving Europe close to a fiscal union and had many suggesting a turn in the tide for the Euro. The risk-sensitive Aussie and Kiwi extended their advances. Despite a marked fall in Australian April Retail Sales, the Aussie Dollar rose to an overnight and 10-week high at 0.66162 (0.6535 yesterday) before dipping to 0.6595 in early Sydney. The New Zealand Dollar soared to 0.61579 (0.6075) overnight peak, slipping back to 0.6148 after RBNZ Chief Economist Ha suggested that there would be no rate changes until March 2021. Sterling underperformed, finishing little-changed at 1.2238 from 1.2235 yesterday. UK CPI fell to 0.8% in April, its lowest in close to 4 years. The Dollar Index (USD/DXY), a favoured gauge of the Greenback’s value against a basket of 6 majors, dipped 0.2% to 99.178 from 99.578 yesterday. Wall Streets stocks advanced. The DOW added 1.6% to 24,615 (24,205) while the S&P 500 was 1.8% higher to 2,977 (2,922). Bond yields eased. The key 10-year US treasury yielded 0.68% from 0.69% yesterday. Germany’s 10-year Bund yield was flat at -0.47%.
Data released yesterday saw Australia’s ABS April Retail Sales plunge to -17.9% from 8.5% in March. UK CPI fell l to 0.8% in April, missing forecasts at 1.0% and March’s 1.5%. The Eurozone’s Final CPI slipped to 0.3% from 0.4% and lower than expectations of 0.4%. Canada’s April CPI fell to -0.7% from -0.6% previously, and missing forecasts at -0.6%.
On the Lookout: The market’s new-found optimism will be tested today by a data deluge.
Australia starts the day with its Commonwealth Bank Preliminary Manufacturing and Services PMI report. Japan follows with its April Merchandise Trade Balance as well as Imports and Exports. Japan’s Jibun Flash Manufacturing PMI follows.
RBA Governor Philip Lowe speaks at a function hosted by the Financial Services Institute (12.30 pm Sydney time).
Euro area date follow next with French, German and Eurozone Flash Manufacturing and Services PMI data. The UK reports on its Flash Manufacturing and Services data as well as CBI (Confederation of British Industry) Industrial Order Expectations. Canada’s ADP Non-Farm Employment Change kicks off North American reports. The US sees off its Philly Fed Manufacturing Index, Weekly Unemployment Claims, Flash Manufacturing and Services PMI (May), Conference Board Leading Index, and Existing Home Sales. Federal Reserve Chair Jerome Powell speaks at a Covid-19 event.
Trading Perspective: Dollar bears/Currency bulls will take a breather today into the data deluge. Global PMI’s are expected to show improvements, particularly those from the Euro area.
Traders will keep their focus on Covid-19 developments to see if any lifting of restrictions will bring about a second wave. The trade disputes between the US and China as well as Australia and China are far from resolved. All these factors could sour risk appetite, as well as see a Greenback rebound.
