Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback weaker, Aussie stronger
The greenback was lower overnight as a weaker-than-expected retail sales numbers continued to paint a picture of a US economy that is losing momentum in the consumer space even as the labour market remains strong.
May retail sales came in at 0.1% (versus the 0.3% forecast) while the April number was revised lower to a 0.2% fall.
The USD index fell 0.1%.
Most other markets were relatively quiet with NZD/USD up 0.2% and USD/SGD down 0.1%.
The other focus was from the Reserve Bank of Australian decision that saw the Aussie strongly higher as the central bank kept rates on hold and continued to signal that any cuts are still some time away.
The AUD/USD gained 0.7% The Aussie was higher in other markets reaching one-month highs versus the British pound and one-year highs versus the euro.
GBP stays resilient as euro crumbles
In Europe, we’ve seen a clear divergence in markets as the British pound is supported by stronger growth while the euro is held hostage to political woes.
That said, the GBP/USD has been capped below 1.2800 with the pair trapped between better UK growth and a potential dovish BoE pivot.
In the UK, the PMI manufacturing output price index rose a touch further in May to around its pre-pandemic average, while the equivalent balance in the CBI’s industrial trends report edged lower. The prices balance in the Lloyds business barometer rose to record highs. Some shipping container rates have also risen.
Based on those data points, we expect a 0.2% m-o-m rise in headline output prices in May with UK inflation for May due at 4.00pm AEST.
Indonesian rupiah hits four-year lows
The Indonesian rupiah has been dragged lower as per most Asian FX in line with the monster moves higher in USD/JPY.
The USD/IDR hit four-year lows yesterday.
Looking forward, we expect the goods trade surplus to decline slightly to USD3.5bn in May from USD3.6bn in April.
Export growth likely returned to negative territory, with external demand from key trading partners, such as China, remaining weak. Import growth likely declined sharply, largely reflecting high base effects.
We remain mostly negative on IDR given tax cut on interest gains on IDR deposits are unlikely to result in much more FX conversion by exporters.
Aussie higher after RBA
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 17 – 22 June
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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