[From this month, FX news commentaries will be monthly, owing to popular client requests.]
In the second half of April, we saw a rally of the US dollar against different currencies, with investors taking profit, while awaiting publication of the April US labor market report. In addition, the Federal Reserve left the rates firm, and confirmed that it will raise the cost of money very gradually. This may have disappointed those who expected an acceleration in the Fed’s tightening path.
Let’s now take a stock of where AUD stands:
Since December 2017, we do not see the AUDUSD rate in 0.75. After reaching the highs above 0.81 area in the end of January, prices have quickly taken a single direction, leading to a strengthening of 8% in 3 months against the AUD.
We will see a pause, a possible re-tracement and then continuation of price evolution, or there will be a continuation of the AUD downtrend and I know Jerome Powel could help.
We await the first data on US inflation on Thursday and the Fed is currently signaling two more rate hikes this year, but the inflation figures – if strong enough – could just confirm growing expectations among market players that it will squeeze in a third.
In February 2017, the AUDEUR exchange rate saw prices go from 0.73 to 0.62, and in this second quarter, the EUR’s outperformance against AUD was slowed by a weak stable inflation around the 1% area.
US-led trade tensions remain a cause of concern for both Australia and the Eurozone, and AUD may suffer more if the US tariffs on China are confirmed and China retaliates in the weeks ahead. If commodity prices continue to stabilize, we could see a strengthening of AUD against the Euro after creating support in the 0.62 area.
Any signs that the BoE is likely to maintain a policy tightening bias in the months ahead should offer support to the Pound.
It will be important to see the latest quarterly inflation report, which could lead to higher rates and further appreciation of the GBP.
CNY eyes on industrial production, and forecast are positive. However, a worse than expected figure could give more strength to AUD, especially, if we have positive data on retail sales and employment change.
Since the end of January 2018, AUD has lost about 8% against CNY.
The strength of the USD led to a rapid price movement against INR of 65 to 67 and even AUD was affected by this intense movement. The bullish trend could bring prices AUD-INR back to area 51.
Major events/data this month:
Tuesday, May 8
|11:30||AUD||Retail Sales (MoM) (Mar)|
|17:15||USD||Fed Chair Powell Speaks|
Wednesday, May 9
|00:00||USD||JOLTs Job Openings (Mar)|
|22:30||USD||PPI (MoM) (Apr)|
Thursday, May 10
|00:30||USD||Crude Oil Inventories|
|07:00||NZD||RBNZ Interest Rate Decision|
|07:00||NZD||RBNZ Rate Statement|
|08:00||NZD||RBNZ Press Conference|
|11:10||NZD||RBNZ Gov Orr Speaks|
|18:30||GBP||Manufacturing Production (MoM) (Mar)|
|21:00||GBP||BoE Inflation Report|
|21:00||GBP||BoE Interest Rate Decision (May)|
|22:30||USD||Core CPI (MoM) (Apr)|
Friday, May 11
|22:30||CAD||Employment Change (Apr)|
|23:15||EUR||ECB President Draghi Speaks|
Tuesday, May 15
|12:00||CNY||Industrial Production (YoY) (Apr)|
|18:30||GBP||Average Earnings Index +Bonus (Mar)|
|18:30||GBP||Claimant Count Change (Apr)|
|22:30||USD||Core Retail Sales (MoM) (Apr)|
|22:30||USD||Retail Sales (MoM) (Apr)|
Wednesday, May 16
|09:50||JPY||GDP (QoQ) (Q1)|
|19:00||EUR||CPI (YoY) (Apr)|
|22:30||USD||Building Permits (Apr)|
Thursday, May 17
|11:30||AUD||Employment Change (Apr)|
|22:30||USD||Philadelphia Fed Manufacturing Index (May)|
Friday, May 18
|22:30||CAD||Core CPI (MoM) (Apr)|
|22:30||CAD||Core Retail Sales (MoM) (Mar)|
Wednesday, May 23
|18:30||GBP||CPI (YoY) (Apr)|
Thursday, May 24
|00:00||USD||New Home Sales (Apr)|
|18:30||GBP||Retail Sales (MoM) (Apr)|
Friday, May 25
|00:00||USD||Existing Home Sales (Apr)|
|18:30||GBP||GDP (QoQ) (Q1)|
|18:30||GBP||GDP (YoY) (Q1)|
|22:30||USD||Core Durable Goods Orders (MoM) (Apr)|