Tough budget, resilient dollar

Australian Dollar:

The volatility many had expected for the Australian dollar yesterday never eventuated in what was at least on paper a 24 hour period jam packed with economic data flows. First off the rank were Industrial Production, Fixed Investment and Retail numbers from China, all of which mixed missed their mark. Holding firm close to the 0.9350 level when valued against its US Counterpart the subtle moves continued as Treasurer Joe Hockey delivered his first budget, a budget which appears tough on certain individuals and sectors whilst delivering the prudent policy stance many economists say we need. Whilst not absolute austerity the budget has still been branded as the toughest since John Howards post-election budget in 1996. Highlighting just how sticky the Aussie is around existing levels the domestic unit opens surprisingly unchanged this morning at it buys 93.54 US Cents   

• We expect a range today of 0.9320 – 0.9380

New Zealand Dollar

Having traded between a low of 0.8615 and a high of 0.8668 when valued against its US Counterpart over the past 24 hours the New Zealand dollar has done well to absorb a string of poor economic numbers from China, New Zealand’s most important trading partner. Whilst the majority of the weakness occurred early in the piece a marginally weaker US dollar assisted the Kiwi’s cause. Only 10 basis points stronger this morning at a rate of 0.8628 heightened price action is expected over the coming hours ahead of the RBNZ’s Financial Stability Report, a report which published every six months designed to assess the soundness and efficiency of the domestic financial system.  

• We expect a range today of 0.8600 -0.8660

Great British Pound:

Whilst the Great British Pound has mostly sat on the sidelines during the early parts of this week that is expected to change as we head into the London session this evening ahead of The Bank of England’s Quarterly Report. A report which offers growth and inflation updates this should better allow investors to establish their perceptions on when the Central Bank will move rates higher. With the Sterling now poised for an outbreak from existing levels, for the time being it remains benign opening at a rate of 1.6823 when valued against its US Counterpart. In other moves the Sterling is weaker against both the Australian dollar (1.7979) and the New Zealand dollar (1.9500).   

• We expect a range today of 1.7940 – 1.8010

Majors:

The 17-nation Euro has continued to take centre stage across currency markets overnight with the shared unit experiencing a fresh round of selling after the German ZEW Economic Sentiment Report fell well short of expectation. Triggering a sell-off from opening levels of 1.3755 down to a low of 1.3688 downward revisions to both Portugal’s and Italy’s CPI outlooks also didn’t help. Weaker this morning at a rate of 1.3700 the EURO wasn’t the only currency overnight to come under some pressure with the US dollar remaining subdued after April Retail Sales and Core Sales both comfortably missed their forecasted results. With the moment fast approaching where markets will expect improved macro flows from the world’s largest economy already the weather excuse which tarnished the numbers during the first quarter is starting to wear thin. Opening at a familiar level against the Japanese Yen the US dollar swaps hands at a rate of 102.248.      

Data releases 

• AUD: No data today
• NZD: RBNZ Financial Stability Report, RBNZ Gov Wheeler Speaks, Retail Sales q/q
• JPY: CGPI y/y, Prelim Final CPI m/m  
• GBP: Claimant Count Change, Unemployment Rate, BOE Gov Carney Speaks, BOE Inflation Report
• EUR: Industrial Production m/m
• USD: PPI m/m, Core PPI m/m