FX market outlook

FX market outlook

Posted on Thursday, June 1 2017 at 7:52 am GMT+0000

Aussie swings from gains to losses on Australian retail sales and Chinese data; oil rebounds after API

The Australian Dollar had a choppy session after domestic and Chinese data. The greenback moved higher while oil rebounded from a two-day decline after the API report.

The aussie jumped against the greenback to a high of to $0.7453 after Australian retail sales were stronger than expected. It reversed gains on disappointing Chinese manufacturing PMI data, which took the currency down to its lowest level since May 12 at $0.7383. China is Australia’s major trading partner.

Australian retail sales rebounded sharply from March’s 0.2% drop, to rise 1.0% month-on-month in April, well above the 0.3% rise expected by economists.

A private gauge of China’s manufacturing fell below 50, showing contraction for the first time in nearly a year and contradicting an official gauge released yesterday. The Caixin manufacturing PMI index fell to 49.6 in May from 50.3 in April, whereas the official number released by the Chinese government on Wednesday remained unchanged at 51.2 in May.

In other data, Japan also released manufacturing PMI data which came in with a reading of 53.1 in June versus the previous 52.0. Capital expenditure numbers for the first quarter were also upbeat, rising 4.5% versus 3.8%.

The Japanese data had little effect on the yen, as the dollar continued to rise during the Asian session to reach a high of 111.08 yen.

Sterling eased back down after briefly rising above the key $1.2900 yesterday, to slide to a session low of $1.2839. The pound has been quite volatile recently, with just over a week to go before the June 8 elections and polls showing a narrowing lead for Prime Minister Theresa May’s Conservative Party over the Labour Party. UK manufacturing PMI data will be in focus later today.

Oil rebounded after the American Petroleum Institute (API) report on Wednesday showed that US crude inventories fell sharply last week by 8.7 million barrels. WTI oil rose to $48.88 a barrel after moving off a low of $47.72 touched on Wednesday. The inventory report from the Energy Information Administration(EIA) will be released today.

Gold fell from yesterday’s one week high of $1274 an ounce to $1265.