The highlights of the Asian session include the final PMIs from Australia and Japan, Q1 Australian Capital Expenditure, and the Chinese Caixin Manufacturing PMI. Investors are still wary until the crisis around the US debt ceiling is resolved. Before the release of Friday’s Nonfarm Payrolls report, attention will turn to US employment statistics later on Thursday.
On this coming Thursday, June 1st, please take note of the following:
On Wednesday, the stock market indexes continued their downward trend as investors remained wary. Stocks have recovered from their recent lows. In addition to the Fed officials’ statements indicating a desire for a pause at the next FOMC meeting, the rally in stocks impacted on the US Dollar. The ongoing debate in the US Congress is expected to result in a satisfactory resolution to the debt-limit problem.
A report by Brown Brother Harriman’s analysts reads:
”If the agreement is approved, we expect the FOMC to raise interest rates by 25 basis points at their meeting on June 13 and 14. The financial sector is showing signs of improvement, so the only thing that might stop a raise next month would be a default. However, the information gathered between now and then, beginning with the employment report on Friday, will ultimately determine the outcome of the meeting.”
The latest report on US jobs (the JOLTS report) left the door open for a future rate increase. Many eyes will be on Thursday’s ADP jobs data and Jobless Claims numbers. Nonfarm Payrolls, due out on Friday, is the most important data. “Economic activity was little changed overall in April and early May,” the Beige Book reported.
The US Dollar Index (DXY) gained 0.15 points on Wednesday, but still finished the day well below its high. At 104.70, the DXY was at its highest point in two months; since then, it has fallen to 104.20.
Annual inflation rates decreased in both Germany and France. The Consumer Price Index (CPI) for the Eurozone is projected to remain unchanged on Thursday. The Euro fell when inflation data was released. While the market and ECB officials both still anticipate rate hikes, the previously tightened expectations have loosened. The US dollar saw a widespread correction, which helped the euro to strengthen from its low of 1.0630. The two currencies were up and about 1.0700. Although the downtrend persists, bearish momentum appears to be fading.
As more rate hikes from the Bank of England are anticipated to contain inflation, the value of the pound continues to rise. After recovering from earlier losses, the British pound gained ground against the US dollar, eventually closing at a daily high at 1.2450. The Euro to Pound exchange rate continued to slide, dropping for a fourth day in a row. The final exchange rate was below 0.8600, its lowest point since early December.
For the third day in a row, the US dollar/Japanese yen exchange rate has slipped below 139.50. The weakening of government bond yields in Europe and the United States has helped keep the Japanese Yen strong. The yen is benefiting from positive public discourse and action by Japanese authorities.
Higher-than-anticipated inflation in Australia and comments from Reserve Bank of Australia Governor Lowe signalling further rate hikes did not help the Australian dollar. After hitting new six-month lows at 0.6456, the AUD/USD ended the day near where it started, at approximately 0.6500.
During the American session, the NZD/USD recovered some of its losses and climbed back over 0.6000, where it had been trading for the first time since mid-November.
The Canadian dollar surged throughout the American session on the back of stronger-than-anticipated domestic statistics. Annual growth in real GDP was 3.1% in Q1, beating expectations of 2.5% and bouncing back from a 0.1% decline in Q4. The GDP expansion was 0.2% in advance in April. Those figures raised the possibility that the Bank of Canada might raise interest rates the following week. A close of 1.3570 USD/CAD was the worst in a week. The 1.3650 area provided fresh resistance for the duo. The near-term picture is becoming increasingly bearish.
After Erdogan’s victory in the presidential elections, the Turkish Lira fell, making it the worst performing currency once again. The US dollar against the Turkish lira hit an all-time high of over 20.70, a new record. Its previous close was 19.70 last Friday.
In response to falling rates, gold prices increased somewhat before retreating to $1,960. The price of silver climbed above $23.50, a new high in a week. The Bitcoin/U.S. Dollar exchange rate dropped by 2.35% to $27,120, reflecting the overall market decline in cryptocurrencies. As the economic picture grew gloomier, crude oil prices followed suit, falling by more than 2%.
