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The Australian Dollar remains under pressure

Published: Tuesday 01 May 2018

  • Aussie interest rates on hold
  • USD retains strength ahead of rate announcement and employment report
​​By David Johnson

Happy May Day everyone.
The Australian Dollar is a tad weaker this morning after the Reserve Bank of Australia left its base rate on hold overnight. That’s 19 straight meetings without a change and this meeting offered no clues as to when or if they might start to raise the base rate again.
The US Dollar continued to rule the roost on Monday and is strong this morning ahead of tomorrow’s Federal Reserve meeting and Friday’s employment data. No one is seriously expecting the Fed to raise the US base rate at this meeting but they may set their stall out over the next interest rate hike and the pace of future hikes. There is a smattering of US data today; most interesting of which is the ISM manufacturing index; a measure of sentiment in that sector. The forecast is for a small scale reduction in confidence.
Many Asian markets were closed overnight for the Labour Day break. We’ll celebrate May Day on Monday in the UK but May Day parades and celebrations take place in many countries today.
The day ahead does bring some interesting data though. It starts with the UK manufacturing Purchasing Managers’ Index (PMI) which is forecast to be marginally down on last month’s. We will also get UK mortgage lending and approvals. These too are expected to be a little less optimistic than last month’s. So Sterling, which has recovered a little against the Euro but is still down against the USD, may well ease a little lower.
This afternoon brings the latest economic growth data from Canada. A rebound from January’s dip into contraction is expected. Something like 0.3% month on month growth is expected. We will watch with interest but, if that forecast is accurate, CAD strength is likely later in the day.
Overnight tonight, we will see the New Zealand employment data. The unemployment rate is likely to have dropped a tad but many believe hourly earnings will show weakness. The NZ Dollar is set for a busy night.
And, with the antipodes in mind, if you are thinking of moving to Australia, please pause to reflect on the possibility that it doesn’t actually exist. This is the ‘fact’ according to Shelley Floryd, who shared her thoughts on Facebook… obviously. She said, “Australia does not exist. All things you call 'proof' are actually well fabricated lies and documents made by the leading governments of the world. Your Australian friends? They're all actors and computer generated personas, part of the plot to trick the world." Now Shelly subsequently removed the post (maybe when someone from Australia queried it), but a group of ‘flat earth’ types have taken up the story as truth and are espousing similar theories themselves. Oh come on people; who could possibly have made up something as ridiculous as the kangaroo or the digeridoo for that matter.
Thought for the day
I was starting to question my own sanity until the crystal unicorn and his friend the fabulous jellybean queen told me I was completely fine. Phew.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Manufacturing Purchasing Managers' Index 55.1 54.8
GBP 09:30 UK: Net Lending to Individuals 5.4b 4.9b
GBP 09:30 UK: M4 Money Supply -0.3% 0.2%
GBP 09:30 UK: Mortgage Approvals 64k 63k
CAD 13:30 Canada: Gross Domestic Product -0.1% 0.3%
CAD 14:30 Canada: Manufacturing Purchasing Managers' Index 55.7 55.7
USD 15:00 US: ISM Manufacturing Purchasing Managers' Index 59.3 56.5
NZD 23:45 New Zealand: Unemployment Rate 4.5% 4.4%
NZD 23:45 New Zealand: Employment Change 0.5% 0.5%

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