2nd June 2020 - Busy week is ahead headlined by today’s RBA Statement


Market Headlines

Sentiment remained upbeat amid signs of economic recovery. That trumped ongoing US-China tension, US civil unrest, and poor results from vaccine trials. The S&P500 is up 0.5% on the day. Risky currencies, bond yields, and commodities also rose.


Currencies

The US dollar index is down 0.5% on the day, to a three-month low.

EUR ranged sideways between 1.1100 and 1.1154.

USD/JPY ranged between 107.40 and 107.75.

Out-performer AUD rose from 0.6725 to 0.6817 – the highest level since 27 January.

NZD rose from 0.6220 to 0.6295 – a three-month high.

AUD/NZD extended its two-day rally to 1.0817 and then consolidated.


AUD Thoughts

• Broad-based selling pressure surrounding USD fuels the pair's rally.

• Major equity indexes trade in the positive territory after opening in the red.


The AUD/USD pair started the week on a positive note and rose to its highest level since late-January up 2.3% from yesterday’s lows and hit a high of 0.6817 .Earlier in the day, the upbeat Manufacturing PMI data from China, which showed an ongoing expansion in the sector, helped the AUD gather strength against its rivals. In the second half of the day, the US Dollar Index (DXY) started to push lower after the Manufacturing PMI data published by both the ISM and the IHS Markit showed an improvement in May. Moreover, despite the widespread unrest in major US cities, Wall Street's main indexes erased early losses and moved into the positive territory on Monday to reflect a risk-on environment. At the time of press, the DXY was down 0.47% on the day at 97.85.


Eyes on RBA

The RBA will release its monetary policy statement and announce its interest rate decision. Previewing the RBA meeting, "recent RBA commentary suggests outcomes are better than the Bank's central forecast but below the optimistic scenario," noted RBA analysts. "This gives the RBA time to assess developments till September which is when most fiscal measures are anticipated to roll off."


Event Risk Data Today

Australia: There are several important releases today starting with Q1 Company Profits/Inventories/Net exports/Current Account/Public Demand. Apart from data, markets will be watching the RBA’s policy decision announcement. With the RBA continuing to rule out negative rates, the cash rate is set to remain at its current level until at least 2023.


New Zealand: Market consensus expects that dwelling consents fell by approx. 60% over April, a result of the lock-downs that remained in place over most of the month. The Q1 terms of trade are also out, and whilst dairy prices saw a small rise, there were sizable price falls for meat, seafood, logs and crude oil.


Europe: May Markit manufacturing PMIs for Germany and the Euro Area will be released.

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