Sean Callow, Research Analyst at Westpac, explains that it has been a rough week for a couple of the May outperformers, the kiwi and euro.
Key Quotes
“The euro started the week strongly with investors welcoming centrist Emmanuel Macron’s resounding victory over nationalist and euro opponent Marine Le Pen in the French presidential election. EUR/USD rose above 1.10 for the first time since the US presidential election in November. But the pair quickly ran out of steam, down over a cent at time of writing, in the high 1.08s.”
“There is probably little lingering political risk premium in the euro, with Macron’s winning comfortably and German chancellor Merkel’s lead in the polls extending ahead of the 24 September election. This returns the euro’s focus to yield differentials. Some yields outside the US have been keeping pace with the recent rise in e.g. the US 2 year T-note yield. But it is not at all clear that this can continue in EUR’s case, with ECB president Draghi this week hinting that any change of rhetoric on 8 June is likely to be marginal.”
“NZD had been easily the strongest G10 currency from end-April to 10 May, +1.1% against USD, while all others had fallen against the dollar as the FOMC erred on the hawkish side and followed up with a raft of upbeat commentary from officials. The bullish kiwi case was supported by the strong NZ jobs data, rising dairy prices and the Q1 inflation bounce, ahead of the RBNZ decision.”
“This kiwi rally ended up amplifying the reaction to the RBNZ’s steady cash rate, limited change in language and unchanged projection for the OCR to not move until Q3 2019. The RBNZ statement is likely to take the shine off the kiwi for some time, helping AUD/NZD dodge 1.06.”
“AUD/USD though is yet to form a base and seems set to print new 4 month lows under 0.73. Australia’s domestic story is fairly stable but turbulence in China’s financial sector (including iron ore futures) is causing collateral damage to the Aussie.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD rebounds from multi-week lows, trades above 1.0750
EUR/USD came under heavy bearish pressure and declined to its weakest level in three weeks below 1.0750 on Friday after the stronger-than-expected Nonfarm Payrolls data. Week-end flows, however, helped the pair erase its daily losses.
GBP/USD remains on track to snap three-week winning streak
GBP/USD recovered toward 1.2550 after coming in within a touching distance of 1.2500 in the second half of the day after Nonfarm Payrolls came in at 199,000 for November. Despite the recent rebound, the pair remains on track to snap a three-week winning streak.
Gold retreats below $2,020 as US yields push higher
Gold broke below its daily range and declined toward $2,010 with the immediate reaction to the upbeat US November jobs report. Although XAU/USD managed to recover toward $2,020, rising US Treasury bond yields triggered another leg lower.
Bitcoin price could retrace to $42,000 if US Nonfarm Payroll comes in at 180,000
Bitcoin price just like other assets, is highly impacted by the macro-financial developments. This includes the Nonfarm Payrolls (NFP) report released by the BLS of the United States.
The week ahead – Fed, ECB and Bank of England rate decisions
When the Federal Reserve kept rates unchanged back in November for the second meeting in a row there was still the distinct possibility that the final meeting of 2023 would provide the possibility of one more rate rise to round off the year in line with Fed policymakers dot plot forecasts of 5.6%.