Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD lower on Friday
The US dollar was stronger for the first four days of last week, but the world’s most traded currency stumbled on Friday ahead of the Memorial Day long weekend that will see US markets closed on Monday.
The USD finished with only a small weekly win – up 0.3%.
The Aussie was one of the biggest losers last week, down 1.0%. Wednesday’s monthly CPI reading is likely to be the key release this week.
The NZD/USD ended flat after a volatile few days last week with the kiwi still near two-month highs after the Reserve Bank of New Zealand came out with a more hawkish policy statement and left the door open for further rate hikes.
In Asia, USD/JPY was up 0.9% over the week. USD/SGD gained 0.3% while the USD/CNH gained 0.4% as the People’s Bank of China allowed the USD/CNY fix to climb to the highest level since January.
Euro in focus as ECB looms
The European Central Bank meets next week and markets remain focused on the potential for a rate cut at the ECB’s 6 June meeting.
However, with the euro recently lower, especially versus the AUD and NZD, the risk is the ECB might remain more neutral and only modify its policy plans.
Simultaneously, the primary obstacle now faced by the country’s data is that while growth is rising, productivity growth is not showing any indications of improvement, and service inflation is still persistent.
Inflation numbers key this week
FX markets will be driven by key economic data releases from Australia, New Zealand, South Korea, Japan, China, Taiwan and India over the coming week.
Australia’s inflation report on Wednesday will be closely watched, with consensus expecting the annual CPI rate to dip slightly to 3.3%.
Friday brings important data from North Asia, including South Korea’s industrial production, Japan’s inflation, retail sales and industrial output figures, as well as China’s manufacturing PMI. Taiwan and India will also report Q1 GDP numbers.
From the US, Thursday’s GDP numbers and Friday’s personal consumption and expenditure numbers will be the highlights.
The Australian dollar could see volatility around the mid-week CPI print, while the Japanese yen may be impacted by any surprises in the Tokyo CPI and other data that could influence the Bank of Japan’s policy stance.
Asian export and production numbers will also be market movers for regional currencies.
Aussie bounces after tough week
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 27 – 31 May
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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