Risk appetite remained elevated overnight with the prospect of economic re-openings and additional government stimulus out weighing the geo-political tensions and American civil unrest, with little fresh news of note. The S&P500 is up 0.8% on the day, and at a three-month high. The AUD again outperformed major currencies, while bond yields and commodities also rose.
The US dollar index is down 0.2% on the day, to a fresh three-month low, the defensive USD continuing to slide as global risk sentiment improves. EUR rose from 1.1120 to 1.1196 – a here-month high. USD/JPY rose from 107.75 to 108.77 – a two-month high, as the defensive yen under performed all the majors. Outperformer AUD rose from 0.6800 to 0.6895 – the highest since mid-January. NZD also performed well, rising from 0.6265 to 0.6308 – a three-month high. AUD/NZD rose from 1.0800 to 1.0881 – the highest since October 2018 - before consolidating
The currency is on a tear and upward momentum appears intact for now too. Overnight the dollar reached 0.6895, highest level since mid-January. A key reason for the strength of the rally is weakness in the US dollar. The spot dollar index slipped 0.1 per cent to 97.6960 as of 2.40pm New York time; the index has now slid 5 per cent after spiking to more than 102.8 on March 20.
Also helping the Aussie was the lack of any mention of the currency by the Reserve Bank of Australia yesterday; as in no effort to slow the appreciation. AUD/USD 0.7000 to be a key resistance marker and look for AUDUSD to retrace rather than build off the recent highs, though medium- and long-term forecasts are bullish. That said, tactically, it also screens hot against dollar bloc crosses.
Event Risk Data Today
Australia: The Q1 GDP and April Building Approvals.
Asia: May Nikkei service PMIs will be released for Japan, Hong Kong, Singapore and India. China’s Caixin PMI is also out.
Canada: BOC monetary policy decision
Euro Area: The April PPI & April Unemployment rate
US: May ADP Employment report and May Services and Composite PMI, US – May ISM Non-Manufacturing, April Factory Orders and Durable Goods Orders