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The AUD fell against the USD on Thursday despite strong labor market data from Australia reported earlier in the session. The US Fed governors forecasting fewer rate cuts this year. In addition, the USD kept its strength despite soft inflation figures.
The effects of the Fed’s decision continued to be felt overnight causing a global pullback in equities. US PPI data came in much lower than expected, and jobless claims rose further, which supported the US 10-year Treasury yield and led to a 7.4bps drop to 4.24%. Yields have returned to or below pre-FOMC levels, which were see as more hawkish than anticipated. Typically, lower bond yields would weaken USD, but this effect is being overshadowed by weakness in the EUR due to widening French bond spreads compared to German bunds.
The Bank of Japan is widely expected to leave interest rates unchanged at today’s meeting. However, there is speculation that the BoJ may announce that it will start to reduce its bond buying, or at least begin to discuss the merits of reducing bond buying.
Economic data to watch out for.
• NZ – May. Business NZ Manufacturing PMI
• NZ – May. Food Prices m/m
• JP – BOJ Target Rates
• JP – Apr. Industrial Production m/m
• UK – BOE Inflation Attitude Survey
• EU – ECB’s Lane, Lagarde Speaks
• US – May. Import Price Index m/m
• US – U. of Mich. Sentiment
• US – Fed’s Goolsbee Speaks
Mid market rates.
| Currency Pair | Mid-market rate |
| AUD/USD | 0.6622 |
| AUD/NZD | 1.0766 |
| AUD/JPY | 104.09 |
| AUD/CNY | 4.8150 |
| AUD/EUR | 0.6167 |
| AUD/GBP | 0.5194 |
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