- The UK parliament voted to reject a motion that would have seized control of the parliamentary agenda in order to prevent a no-deal Brexit. GBP/USD weaker in the aftermath, falling below 1.2700 to hit lows of 1.2687. Mixed flows elsewhere with NZD/USD briefly to new highs above 0.6590 while the local unit retested the lows. USD/CAD also making new lows of 1.3274.
- President Trump making headlines as he again said that he expected to make a deal with China, adding that if there was no deal, tariffs would be placed on $325 bio of Chinese goods.
- US 10yr treasury yields ranged between 2.11% and 2.14%, while 2yr yields slipped from 1.91% to 1.87% - partly a response to the subdued inflation data. Markets are pricing an 95% chance of a Fed fund rate cut by July (was 80% yesterday), with a total of three cuts priced by May 2020.
- Australian 3yr government bond yields consolidated around 1.05%, 10yr yields around 1.45%. Markets are pricing a 55% chance of an RBA rate cut at the July meeting.
- The US dollar index is up 0.3% on the day, mostly reflecting the EUR fall from 1.1340 to 1.1283 – a reaction to US threatened sanctions on Germany.
- USD/JPY round-tripped from 108.55 to 108.22 and back.
- AUD was the worst performing major, extending its recent decline from 0.6960 to 0.6925.
- NZD ranged sideways between 0.6565 and 0.6595.
- AUD/NZD fell from 1.0580 to 1.0540.
- FTSE -0.4% at 7368, DAX -0.3% at 12116, CAC -0.6% at 5375, Nikkei -0.3% at 21130, ASX 200 -0.04% at 6544, Shanghai Comp -0.6% at 2909
- Dow -0.2% at 26004 S&P -0.2% at 2881, NASDAQ -0.4% at 7792
- VIX Volatility -0.5% at 15.91
- Commodities CRY -0.9% at 173.24, Natural gas -0.8%, Cotton +1.4%, Crude Oil -4.0%, Copper -0.4%, Wheat +1.6%, Sugar +0.6% Gold at $1333/oz
AUD Thoughts/Technical Outlook
- US Dollar Index rises toward the 97 mark.
- Inflation in the U.S. softens more than expected.
- Unemployment rate in Australia is expected to tick down to 5.1% in May.
After spending the majority of the day moving in a tight range near 0.6950, the AUD/USD pair came under a renewed selling pressure and fell to its lowest level since June 3 at 0.6928.
The recent fall witnessed in the pair seems to be caused by fresh demand for the greenback. Despite a lack of fundamental drivers, the US Dollar Index extended its daily recovery toward the 97 mark in the NA session and was last up 0.23% on the day at 96.95.
Today's data from the United States showed that inflation, as measured by the Consumer Price Index (CPI), rose 0.1% and 1.8% on a monthly and yearly basis, respectively. Furthermore, the annual core CPI ticked down to 2% in the same period to miss the market expectation of 2.1%.
Today markets will be closely watching the release of the domestic labour market data. Previewing the data, "NAB is forecasting a strong report given the employment boost from temporary workers hired to run the federal election. We expect employment grew by 40k and the unemployment rate ticked down to 5.1% in May," NAB analysts said.
"If we are wrong and unemployment increases again, then the market would price in the risk of a July rate cut.”
Technical levels to watch for
AUD/USD is trading in a bear trend below its main daily simple moving averages (DSMAs). The market is trading at its lowest in 7 days with AUD under bearish pressure below its main SMAs.
A sustained break below 0.6930 can send the Aussie to 0.6900 and 0.6880/70. Resistances are seen at 0.6960 and 0.7000 levels.
Event Risk Data Today
- Australia: May employment is expected to rise by 16k and see the unemployment edge down to 5.1% following Apr’s lift to 5.2% from 5.0% in Mar. Market expects a more muted 5k employment gain in May and the unemployment rate holding at 5.2%.
- Euro Area: Apr industrial production is anticipated to decline 0.2% following a 0.3% decrease in Mar.