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AUD Slumps on Covid Complacency; Asians, EMS Fall
Summary: A rise in US Consumer Confidence in June and higher Home Prices lifted the Dollar Index (USD/DXY) to its highest finish in over a week. USD/DXY which measures the value of the Greenback against a basket of 6 major currencies finished at 92.05, up 0.18% (91.90 yesterday). The Australian Dollar slumped 0.73% to 0.7512 (0.7565), finishing as worst performing currency. While Australia was celebrated for its initial response to the Covid-19 pandemic, complacency has seen rising clusters of the infectious Delta variant lock down Sydney and shut state borders. These periodic lockdowns will cost the Australian economy. Elsewhere FX trading was slow and featureless into the last trading day of the month and quarter. The Aussie’s fall weighed on risk currencies with the Kiwi (NZD/USD) losing 0.75% to 0.6995 from 0.7040. Against the Canadian Loonie, the Greenback rose 0.46% to 1.2390 (1.2343). The Euro dipped 0.22% to 1.1902 (1.1922) while Sterling eased to 1.3850 (1.3874 yesterday). USD/JPY was little changed at 110.55 (110.60). The Dollar advanced against the Asian and Emerging Market currencies. Many Asian countries have also struggled to contain a third wave of the highly infectious Covid 19 delta variant.
Wall Street stocks finished higher. The DOW finished at 34,337 (34,307) while the S&P 500 rose to 4,297 (4,292). US and global bond yields were steady. The benchmark US 10-year yield settled at 1.47% (1.48% yesterday). Germany’s 10-Year Bund yield closed at -0.17% from -0.19% yesterday.
Data released yesterday saw Japan’s Unemployment rate in May rise to 3.0% from 2.8% April, higher than forecasts at 2.9%. Japanese May Retail Sales in May rose an annual 8.2%, higher than median estimates of 7.9%. UK’s Nationwide House Price Index (June) rose 0.7%, matching forecasts. UK May Mortgage Approvals (m/m) rose to 88,000 from the previous 86,900, beating forecasts at 85,300. US April House Price Index rose 1.8%, bearing expectations of 1.5%. US S&P Case Shiller Home Prices rose 14.9% in April from a previous 13.9%, beating median forecasts at 14.5%. Finally, the US Conference Board Consumer Confidence Index rose to 127.3 in May from 120.0 in April, beating median forecasts at 118.9.
On the Lookout: Expect month, quarter, and half-year end factors to dominate trade amidst a heavy data calendar into Friday’s US Payrolls report. The economic calendar kicks off with Japan’s Preliminary Industrial Production for May (m/m f/c -2.4% from 2.9%), June Consumer Confidence (m/m f/c 34.8 from 34.1) and May Housing Starts (f/c 8.3% from 7.1%). China releases its June Manufacturing PMI report (m/mf/c 50.8 from 51.0) and Non-Manufacturing PMI (f/c 55.3 from 55.2). Australia releases its Private Sector Credit for May (m/m f/c 0.3% from 0.2%). European reports start off with Germany’s June Unemployment Rate (f/c 5.9% from previous 6.0%), French Preliminary CPI (f/c 0.2% from 0.3%), Eurozone June Flash CPI (previous read was 0.3%, no f/c given), Eurozone June Flash Core CPI (f/c 0.9% from 1.0%). North American data kicks off with Canada’s April GDP (f/c -0.8% from 1.1%), May PPI (m/m previous was 1.8%). Finally, the US releases its June Chicago PMI report (f/c 70 from previous 75.2), Pending Home Sales for May (m/m f/c -0.8% from -4.4%).
Trading Perspective: While the US Dollar finished stronger for the third day running this week, markets will be hesitant to drive it much further ahead of Friday’s Payrolls. With today being the last trading day of the month, quarter and half-year, technical factors will dominate.
Chinese PMI data will be the focus this morning in Asia as well as the continuing Covid-19 conditions in Australia and other Asian nations (Indonesia, Thailand). Australia’s vaccination rate remains low and will continue to challenge the federal and state governments.
Happy Wednesday and trading all.
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