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Market Update 31/05/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
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US equities declined and bond yields dropped overnight due to weaker US economic data. The yield on the US 10-year decreased by 6bps to 4.55%. US Q1 GDP data showed a 1.3% annualized growth in the first three months of the year, down from the previous estimate of 1.6%. This decrease mainly reflects weaker consumer spending on goods. Personal spending, the main driver of the economy, grew by 2.0%, down from the previous estimate of 2.5%. These figures highlight a slowdown at the beginning of 2024 after consistent positive surprises in 2023. High interest rates, dwindling savings from the pandemic, and slower income growth are some of the key factors affecting American households and businesses.
NZDUSD is up this morning and back above 0.6100, mainly due to the USD adjusting in response to the overnight reversal in bond yields. The market is slightly cautious about the NZ budget, which includes wider budget deficits in the near term, delayed fiscal consolidation and larger-than-expected debt load. All attention now turns to the US PCE inflation data tonight. If the data is stronger than expected, the USD is likely to rebound higher, which would push down NZD back into the 0.6000 range. Alternatively, a weaker PCE number could trigger a significant rally in Treasuries, spark speculation about a September Fed rate cut and boost equities and the NZD. In that case, NZD would target key resistance levels around 0.6170 or 0.6210.
AUDUSD struggled yesterday as the USD saw a slight rally, driven by comments from the Fed and increasing Treasury yields. Additionally, iron ore prices dropped to a 2-week low due to surplus supply and restrictions on steel mill capacity in China, contributing to the pressure. Moreover, disappointing building approval figures added to the strain. Despite this, AUDUSD recovered to 0.6635 after briefly slipping below 0.6600, while NZDAUD has softened slightly to 0.9220.
JPY outperformed notably better compared to other G10 currencies, driven by speculation that Japanese authorities might intervene in response to the currency’s drop to a significant level. After weakening past 157.50, which is where Japan was last thought to have intervened, the yen rebounded. NZDJPY is currently hovering around 96.00.
EURUSD has edged higher to 1.0845, while NZDEUR has slightly declined to 0.5643. It was not a significant market influencer, but the Unemployment rate in the Europe dropped to 6.4%, marking its lowest level since the establishment of the currency bloc. However, this development is unlikely to deter the ECB from initiating an easing cycle next week with a 25bps rate cut.
Looking ahead, the economic calendar is once again filled with key events. Japan’s CPI data will be out at 11:30am NZT, China’s Manufacturing PMI data at 1:30pm NZT. Tonight, we’ll be getting CPI data from Euro zone, Canada’s GDP, and the main event will be US Personal Consumption Expenditures (PCE) inflation data at 12:30am NZT.

 Here are the latest mid-market rates:

Currency PairMid-market rate


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