Yahoo Finance Trade Wars and All – The USD Finds Support Ahead of Today’s Stats
Earlier in the Day:
Economic data released through the Asian session this morning was on the lighter side, with stats limited to manufacturing PMI figures out of Australia, 1st quarter capital spending numbers out of Japan and China’s manufacturing PMI number.
For the Aussie Dollar,
The AIG manufacturing Index slipped from 58.3 to 57.5 in May, with 5 of the 7 activity sub-indexes expanding in May, while 7 of the 8 sub-sectors expanded, none contracting.
The new orders sub-index rose by 0.8 points to 62.4, with the exports sub-index rising by 4.5 points to 52.5, while production, sales, stocks and capacity utilisation saw softer numbers, with only the stocks sub-index contracting in May.
On the inflation side, selling prices and average wages saw a slower pace of growth, while input prices accelerated.
The Aussie Dollar moved from $0.75668 to $0.75689 upon release of the figures.
For the Japanese Yen, capital spending rose by 3.4% in the 1st quarter, year-on-year, which was better than a forecasted 3.2% rise, whilst easing from the 4th quarter’s 4.3% increase.
The Japanese Yen moved from ¥108.738 to ¥108.816 against the Dollar, upon release of the figures, before sliding to ¥109.05, down 0.26% for the morning.
Out of China, the Caixin manufacturing PMI was unchanged at 51.1 in May, falling short of a forecasted rise to 51.3.
While the sector continued to expand at a modest pace, total new work expanded, while export sales eased. Production growth picked up pace, but remained moderate overall, with cost reduction efforts seeing employment continuing to fall.
The Aussie Dollar showed little response to the figures, moving from $0.75641 to $07566 upon release of the figures, before falling to $0.7544 at the time of writing, down 0.32% for the morning.
In the equity markets, it was a day of red, with the Nikkei down 0.03%, giving up gains from earlier in the session, while the CSI300 slid by 0.81% ahead of the weekend trade talks. The ASX200 and Hang Seng were down 0.22% and by 0.32% respectively at the time of writing, while the U.S futures markets were in positive territory, the Dow mini up 29 points.
The Day Ahead:
For the EUR, economic data out of the Eurozone this morning includes May’s finalized manufacturing PMI numbers, which will be a reminder of a deterioration of economic conditions across the region at a time when geo-political risk has resurfaced.
While the actual figures are unlikely to provide the EUR with too much support, an upward revision to Germany’s PMI would be well received, though the markets are going to have to deal with a number of other risk events through the day.
Out of Spain, Rajoy could be shown the door later today, if the vote of no confidence doesn’t go his way, while tariffs are back as the EU’s exemption to steel and aluminium tariffs expire. To make matters worse, reports of Trump suggesting that he will be banning luxury German car manufacturers from the U.S market won’t help either.
On the positive side, the Five Star – League coalition reached a new deal to form government on Thursday, the two parties finding compromise by putting forward Giuseppe Conte as Prime Minister, though it’s unlikely to be the end of the road of pain, with a new era of friction with Brussels likely to deliver a fresh period of volatility in the EUR.
At the time of writing, the EUR was down 0.18% to $1.1672, today’s stats, trade tariffs and political noise the key drivers through the day.
For the Pound, after a particularly quiet week on the data front, May’s manufacturing PMI scheduled for release this morning will provide direction for the Pound.
Following BoE Governor Carney’s view that softer growth in the 1st quarter was temporary, any positive numbers would reignite talks of a near-term rate hike that could see the Pound move back towards $1.40 levels. Forecasts are for a slower pace of growth in the sector however, which would be a negative for the Pound.
The Pound was down 0.26% to $1.3264 at the time of writing, with today’s PMI number and Brexit chatter in focus, though geo-political risk will play a hand, with trade talks and an expected ousting of Spanish Prime Minister Rajoy in play.
Across the Pond, it’s a big day for the Dollar, with stats scheduled for release this afternoon including the all-important wage growth and nonfarm payroll figures, together with the market’s preferred ISM manufacturing PMI numbers.
While the manufacturing sector numbers are expected to provide some upside for the Dollar, it’s going to boil down to the wage growth, any pickup in wage growth likely to influence market sentiment towards FED monetary policy and the number of rate hikes anticipated for the remainder of the year. No acceleration in the annual rate of inflation, according to figures released on Thursday should temper any material moves however, particularly with the FED talking of a willingness to accept a short-term overshoot.
Outside of the data, geo-political risk will play its part through the day, with Spain’s vote of no confidence and U.S trade tariff talk likely to do the rounds, as U.S allies look to retaliate to the expiration of the trade tariff exemption on steel and aluminium.
At the time of writing, the Dollar Spot Index was up 0.21% to 94.171, recovering from the morning’s 93.947 low, with today’s stats and the Oval Office the key drivers, ahead of the U.S and China trade talks this weekend.
This article was originally posted on FX Empire
