- 1 year 1 week ago 06:00 am
- 1 year 1 week ago 01:00 am
- 1 year 1 week ago 01:00 am
Robust US Factory Activity Fails to Boost Dollar
Summary: Sterling slid in choppy trade to 1.4145 after climbing to a fresh 2-year high (1.4248) earlier in the day. The British Pound provided fireworks in an otherwise dull session where the US Dollar eased against most of its Rivals. GBP/USD had been edging higher as the UK accelerated its vaccine program as well as a hawkish bent from BOE officials. Weaker than expected UK Final Manufacturing PMI (to 65.6 from 66.1) triggered the dramatic drop in the Pound. A rise in US ISM Manufacturing PMI in May (to 61.2 from 60.7 April) failed to boost the Greenback. The Dollar Index (USD/DXY) which measures the value of the US currency against 6 majors eased to 89.87 from 90.0 yesterday. Earlier in the day, the Reserve Bank of Australia announced that it kept its monetary policy settings unchanged at the conclusion of its meeting. The RBA said that it would gauge possible changes to bond purchases in the July meeting which was expected. After initially falling to 0.77307 (overnight low), the Aussie Battler rallied against the overall weaker US Dollar to finish at 0.7753 in New York. Elsewhere in Asia, the USD/CNH extended its rebound to 6.3850 (6.3735 yesterday) following a warning from a Chinese ex central bank official on any rapid appreciation of the Yuan. The Euro was little changed at 1.2218 (1.2225), European and Eurozone PMI data failed to move the shared currency. USD/JPY ended at 109.47 from 109.53 yesterday. Despite a rise in Oil prices, which saw US Crude hit 2-year highs on OPEC intentions to increase production, the USD/CAD was flat at 1.2067. The US 10-year bond yield climbed 2 basis points to 1.61%. UK 10-year Gilt rates were up 3 basis points to 0.82%. Wall Street stocks closed with marginal gains. The DOW edged 0.39% higher to 34,595 while the S&P 500 added 0.21% to 4,203.
Data released yesterday saw Australia’s Building Approvals in May beat forecasts to -8.6% vs -9.9%. The RBA kept its Official Cash Rate unchanged at a record low of 0.1% (as expected). Germany’s Final Manufacturing PMI rose to 64.4 from a previous 64.0. The UK’s Final Manufacturing PMI (May) fell to 65.6 from 66.1 (April), missing estimates at 66.1. US May ISM Manufacturing PMI rose to 61.2 from 60.7 in April and beating expectations of 60.8.
On the Lookout: The countdown to Fridays US Payrolls report gains momentum today. US NFP Employment gains are forecast from 645,000 to 650,000 (from April’s 266,000). Watch the revisions for this number as we head into Friday. Tomorrow sees the US ADP Private Payrolls report. Today kicks off with Australia’s Q1 GDP report (forecast between 1.0% to 1.5% from the previous 3.1%). Watch this number because of the range of expectations from 1.0% (ACY Finlogix) to 1.5% (FX Street and FX Factory). European reports start off with Germany’s April Retail Sales (f/c to fall to -2% from Aprils +7.7%). The UK reports on its April Mortgage Approvals (f/c to GBP 84.988k from GBP 82.7k). RBA Deputy Governor Guy Debelle speaks tonight (7 pm Sydney) to the Senate Economics Legislation Committee via satellite). ECB President Lagarde and Germany’s Bundesbank President Weidman are due to make speeches as well as Fed Governors Bostic and Evans. Lastly the US releases its Federal Reserve Beige Book (4 am Sydney Thursday 3 June).
Trading Perspective: Yet again, better-than-expected US ISM Manufacturing PMI failed to lift the Dollar which continues to trade heavy on bearish sentiment. We would need a decent US Payrolls number (to offset last month’s weak data) and to change the market’s psyche on the Greenback. Until then, given the levels we are currently at, it makes no sense to push the US Dollar much lower. Which boils down to familiar trading ranges remaining intact for now. A caveat though might be the weakness in the Pound. In the old days, GBP/USD or Cable as it was fondly referred to then, would dictate the tone of the US Dollar. The speculative market is still hanging on to long Currency/short USD bets. A better-than-expected US Payrolls report will see a marked shake-out of those overstretched positions. Meantime be content to trade ranges, there’s money to be made in the good old-fashioned buy the lows, sell the highs. Just trade the range shag as we used to say.
Happy trading and Wednesday all.
Get FinTech news headlines, videos, stories and product reviews on your mobile device. Download Financial IT App for Free