Sentiment cooled further overnight as inflationary concerns persisting. The S&P500 is currently down 0.9%, the US dollar is little changed, and bond yields are slightly higher.
Wall Street suffered sharp losses, led by the tech sector, and fueled by rising commodity prices, which may end inflating producer prices and hence, resulting in higher-than-tolerable inflation levels.
The US dollar index is down 0.1% on the day, sitting at a two-month low. EUR rose from 1.2123 to 1.2182. GBP preserved post-local election gains, nudging up to 1.4166 – a fresh two-month high. USD/JPY fell from 108.98 to 108.35. AUD ranged sideways between 0.7820 and 0.7856. NZD also ranged sideways, between 0.7252 and 0.7290. AUD/NZD rose from 1.0770 to 1.0796.
The Australian Federal Budget surprised with a spending package which is larger than was widely expected, and a budget improvement, beyond 2020/21, which is smaller than expected. The Budget deficit for the 2020/21 financial year of $161bn is considerably lower than the $197.7bn forecast by the Government in the December Mid-Year Economic and Fiscal Outlook (MYEFO). However, the deficits for the following years are, on average, higher than in MYEFO. The revised forecasts are: 2021/22, $106.6bn, 5.0% of GDP ($1.9bn less than in MYEFO); 2022/23, $99.3bn ($14.9bn higher than MYEFO); 2023/24, $79.5bn ($13.5bn larger than MYEFO); and 2024/25, $57bn, representing 2.4% of GDP.
Commodities: Brent crude oil futures rose 0.6% to $68.75, copper rose 1.5%, and gold rose 0.1%, while iron ore fell 0.6% from a record high to $228.45.
Overnight Currency Ranges
AUD/USD 0.782 0.7857
EUR/USD 1.2123 1.2181
GBP/USD 1.4105 1.4167
USD/JPY 108.35 108.98
NZD/USD 0.7252 0.7288
USD/CAD 1.2078 1.2126
USD/CNH 6.4162 6.4319
AUD/JPY 84.78 85.45
AUD/NZD 1.0774 1.0795
AUD/USD moving lower early in the NY morning, falling to lows of 0.7820 before quickly rebounding to 0.7857 highs. The second round of US data saw March JOLTS Job Openings rise to 8.123m to come in higher than expectations of 7.500m. No reaction to the better than expected data though the USD did generally stabilise into the NY lunch. From here the market anticipates seeing topside resistance ahead of 0.79c while support can be found if we dip to 0.7815/20. Lastly today, Fed Vice Chair will be participating in a discussion on the US Economic Outlook and Monetary Policy. His remarks could influence expectations for the policy outlook. Today we will also see the release of the May Westpac Consumer Confidence index, previously at 6.2%.
Event Risk Data Today
Euro Area: March industrial production is expected to rise 0.8%, with manufacturing remaining the key source of strength for Europe.
UK: Q1 GDP is expected to contract 1.6% (-6.1%yr), but this will be followed by a robust rebound over the second half as restrictions relax.
US: The market expects that April CPI will rise 0.2%, which will push the year-ended pace to 3.6% on base effects. The April monthly budget statement deficit will remain wide as fresh waves of stimulus come online (market f/c: -100.0bn). Vice Chair Clarida will talk on the US economic outlook.