Asian Session Recap – June 3, 2014

  • RBA kept interest rates unchanged at 2.50% as expected
  • Gov’t budget cuts weigh on RBA outlook
  • Chinese non-manufacturing PMI improved from 54.8 to 55.5
  • Australian retail sales show 0.2% uptick vs. estimated 0.3% gain
  • Australian current account deficit at 5.7 billion AUD in Q1
  • Downward revision in Q4 2013 Australian current account balance
  • Chinese HSBC manufacturing PMI revised down from 49.7 to 49.4
  • Euro zone CPI forecasts to set tone for ECB rate decision
  • U.K. construction PMI due today

Today’s economic events did a number on the Aussie, as the currency took center stage with the releases from China and Australia. Weaker than expected Australian retail sales and a downward revision in the HSBC manufacturing PMI for May led to a bit of selling earlier in the session, but the RBA statement and the Chinese non-manufacturing PMI release gave it a strong boost.

The RBA decided to keep interest rates unchanged at 2.50% as expected, citing that there have been some improvements in hiring and housing but that government budget cuts are likely to weigh on consumer spending and overall growth. The current account balance echoed these budget concerns, as the Q4 2013 figure was downgraded to show a larger deficit. However, the Q1 2014 reading was better than expected at a 5.7 billion AUD shortfall versus the estimated 7.1 billion AUD deficit.

China’s non-manufacturing PMI improved from 54.8 to 55.5, reflecting a stronger expansion in the services industry. AUD/USD dipped to a low of .9231 at the start of the trading session but recovered above the .9250 minor psychological level later on.

In the upcoming London trading session, the U.K. will release its construction PMI and possibly show a climb from 60.8 to 61.2, which would reflect a pickup in the industry. The bigger market-mover could be the euro zone CPI forecasts, which are likely to set the tone for the ECB rate decision later on this week. As Draghi previously mentioned, lower inflation forecasts would probably merit further easing and the latest German preliminary CPI release hinted that annual CPI might fall below the previous 0.7% reading. Stay on your toes for a potential euro bloodbath if that happens!

 

U.S. Session Recap

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