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Economic Data Puts the GBP and Greenback in Focus as Risk Aversion Lingers

Bob Mason

Earlier in the Day:

It was another relatively busy start to the day on the economic calendar this morning. The Kiwi Dollar was in action in the early part of the day. Later this morning, the Japanese Yen will also be in action.

While the markets considered this morning’s stats, however, risk aversion from the day prior continued to weigh on riskier assets early on.

For the Kiwi Dollar

In May, the Business PMI rose from 26.1 to 39.7, reversing April’s tumble by 11.9 points to a record low 26.1. In March, the PMI had stood at 38.0.

According to the May survey,

  • A move through to an alert level 2 enabled manufacturers to boost production off the back of a pickup in new orders.
  • In spite of the pickup in demand, however, employment took another hit in May. Wage subsidies are due to end soon, which could bring more pain before any recovery.
  • Looking at the sub-indexes:
    • The production sub-index rebounded from 19.1 to 38.4, with the new orders sub-index jumping from 16.9 to 40.0.
    • The employment sub-index fell from 41.1 to 39.4.

The Kiwi Dollar moved from $0.64075 to $0.64136 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.20% to $0.6418.

For the Japanese Yen

Finalized industrial production figures for April are due out later this morning. According to prelim figures released in late May, industrial production had slumped by 9.1% in April, following a 3.7% decline in March.

At the time of writing, the Japanese Yen was up by 0.06% to ¥106.81 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.23% to $0.6839.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Finalized May inflation figures for France and Spain are due out along with the Eurozone’s industrial production figures for April.

We’re not expecting too much influence from the stats, which will leave the EUR in the hands of market risk sentiment. FED Chair Powell’s gloomy sentiment towards the economic outlook should pin the EUR back from a run at $1.15 levels for now.

On the geopolitical risk front, EU Finance Ministers are due to hold a virtual meeting later today. We could hear more news on plans to disburse funds to support an economic recovery across the EU. The devil will be in the details.

At the time of writing, the EUR was down by 0.05% to $1.1293.

For the Pound

It’s a particularly busy day ahead on the economic calendar. Key stats from the UK include April GDP, industrial and manufacturing production, and trade figures.

While the markets are expecting dire numbers, a marked contraction would reignite speculation of negative rates…

When you throw in the lack of progress on Brexit and economic uncertainty, a Pound at $1.25 suggests more downside to come.

On the geopolitical risk front, Brexit will remain center stage, however. Any positive news would soften the blow from the economic calendar.

At the time of writing, the Pound was down by 0.19% to $1.2579.

Across the Pond

It’s a relatively busy day ahead on the U.S economic calendar. May import and export price index figures are due out along with June’s prelim consumer expectations and sentiment figures.

We would expect the import and export price index figures to have a muted impact on the day.

Both consumer sentiment and expectations will influence, however. The markets will be looking for a marked pickup in consumer confidence to support a bounce back in consumer spending.

For the markets, there may be yet another harsh reality, however. Unemployment remains uncomfortably high, by historical standards, and the spread of COVID-19 continues across the U.S.

Protests and riots over Floyd George’s unlawful murder will not have helped…

Late in the day, any chatter from Capitol Hill will also need to be monitored. It remains to be seen to where Trump will look to distract voters.

The Dollar Spot Index rose by 0.18% to end the day at 96.733 on Thursday.

For the Loonie

It’s yet another particularly quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

That will leave the Loonie in the hands of market risk appetite.

The markets may have got carried away in the recent wave of optimism. That could mean a move back to C$1.40 levels against the Greenback.

At the time of writing, the Loonie was down by 0.01% to C$1.3631 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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