USD lower after Japan comments
The US dollar turned sharply from two-month highs yesterday after Japan’s Ministry of Finance reacted to the USD/JPY’s recent surge higher saying it would not rule out any options to contain the yen’s fall – including direct intervention.
The US dollar, recently stronger on growing expectations for further rate hikes from the US Federal Reserve, eased lower.
More broadly, markets turned more nervous as investors wait to see whether the new US debt deal, struck by US President Joe Biden and Republican leader Keven McCarthy, can pass US Congress.
US shares were mixed, US bond yields fell, while commodities dropped, with crude oil down more than 4.0%.
Aussie slips lower ahead of RBA, CPI
The Australian dollar was lower ahead of a critical day for the currency with the Reserve Bank of Australia’s Governor, Philip Lowe speaking today followed by the all-important monthly inflation reading.
The Australian monthly inflation number will be seen as key as to whether the Reserve Bank of Australia is forced to hike rates further when it meets next week.
The Aussie was also pressured as commodity prices continued to drop overnight.
The AUD/USD fell 0.3%.
China PMI, German CPI key
Otherwise, China and Germany will be in focus with updates on two of the major economic news stories of 2023 due – slowing global manufacturing and overheating European inflation.
From China, last month’s sharp drop in the NBS manufacturing PMI series – from 51.9 in March to 49.2 in April – sparked fears of a broader Chinese slowdown. The market is looking for a rebound to 49.4.
In Europe, a higher German CPI might provide support to the euro, which has been weaker since the European Central Bank’s smaller than expected 25-basis point hike at the start of May.
USD lower, but Aussie and NZD underperform
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Calendar: 29 May – 2 June
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