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U.S. Dollar underperforms after PMI misses expectations

BY SHAMEEM MUSA

The Australian Dollar steadied through trade on Friday edging higher into the weekly close and consolidating above 0.7550. With minimal macroeconomic data on hand to drive direction the AUD found support in stronger commodity prices, lead by a resurgence in gold, while the USD suffered heavy selling as investors questioned the likelihood of additional Federal Reserve monetary policy action. Despite commentary from FOMC and Fed officials supporting continued tightening of monetary policy conditions, a string of softer macroeconomic data sets, a perceived imbalance in economic growth and the pall of weak inflation weighed heavily on the world’s base currency and investors looked to dump the greenback. The Aussie bounced off intraday lows at 0.7536 to touch session highs at 0.7577 and opens this morning buying 0.7566 U. S cents. With its fortunes heavily tied to US monetary policy expectations attentions now turn to U.S Durable Goods Orders for direction through Monday.  

The New Zealand dollar finished higher against the Greenback in New York trading on Friday. The Kiwi reached a high of 0.7281, up from 0.7267 cents in Asia last week. Quiet day ahead locally with no economic data releases scheduled. Looking at the week ahead tomorrow will see the release of Trade Balance for the month of May. On Thursday, monthly ANZ Business Confidence and finally business confidence on Friday, which will provide an update on how the domestic economy may be faring. The NZD/USD pair is currently trading at 0.7280. We now expect any upward push will likely meet resistance around 0.7320. The kiwi dollar rose to 0.9624 (1.0391) Australian cents from 96.10 (1.0405) cents in New York on Friday.

The Great British Pound fell almost two cents last week against the U.S Dollar and touched an April low of 1.2589 before rebounding and closing the week at 1.2718. 
The Bank of England caused the biggest shift on the GBP/USD pair as Governor Mark Carney said that it was not the time to raise interest rates, he wants to see how households and businesses react to the reality of the UK’s exit before acting. However, the Sterling was able to rally in the second half of the week with traders becoming more confident in May’s proposals for post-Brexit expat rights with the UK allowing EU citizens to settle in the UK in order to avoid any uncertainty regarding their status. Looking ahead it’s big week for the Pound with the vote in parliament on the Queen’s speech which needs to pass in order for May to take power otherwise we are looking at another election.  
 

 

Markets were relatively flat on Friday as the U.S. Dollar saw small losses against G10 currencies. Both Flash Manufacturing and services PMI numbers slowed for the month of June, although still showing a stage of expansion. The U.S. Dollar index closed 0.25% down for the day after one month highs set earlier in the week. Both equity and treasury markets were unchanged. The Euro was sent higher this week after a number of strong manufacturing PMI readings in France and Germany. Hitting a weekly low of 1.1120 on Tuesday, The EUR/USD cross ended the week higher just below the 1.12 handle with further direction dictated by ECB president Mario Draghi’s speech this evening. USD/JPY was little changed, moving slightly lower to 111.20 and could look to retest weekly lows at 111.00 dependent on Treasury yield movements. And finally FOMC Member James Bullard reiterated that the Fed are watching inflation data closely, dictating any future interest rate rises.