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Price action was rather choppy during today’s Asian session, with many currency pairs locked in tight ranges and mixed for the session. The Aussie, the Kiwi, and the yen were exceptions, though, since the yen managed to score wins against all its peers. Meanwhile. the Kiwi and the Aussie both initially climbed higher before retreating later.

  • New vehicle sales in Australia m/m: 0.3% vs. 1.9% previous
  • Japanese tertiary industry activity m/m: -0.2% vs. 0.1% expected, 0.2% previous

Major Events/Reports:

RBA Meeting Minutes

The minutes of the RBA’s May 2 huddle got released earlier today.  And a quick scan of the minutes don’t show anything that’s really standing out or deviates too much from the RBA’s May 2 press statement.

As usual, the RBA reiterated that “an appreciation of the exchange rate would complicate this adjustment process,” referring to the Australian economy’s transition after the resource boom.

Regarding the labor market, the RBA sounded less worried during the May 2 press statement.

And that sentiment was reflected in the minutes when the RBA said that:

“Data on the labour market had been somewhat mixed, but forward-looking indicators continued to suggest that employment growth would maintain its recent pace and spare capacity in the labour market would decline gradually.”

However, the RBA also warned that:

“Recent data on retail sales growth and households’ perceptions of their personal finances suggested that consumption growth had moderated somewhat in early 2017.”

Moreover, the RBA also highlighted the relationship between Australia’s housing market problems and poor consumer spending.

“[I]f households were becoming more focused on paying down debt, this would imply some downside risks to the outlook for household consumption growth. A fall in housing prices could also weigh on consumption growth.”

The RBA also had this pessimistic thing to say about trade:

“Although Australia’s terms of trade were expected to be higher in the near term than had been forecast at the time of the February Statement, much of the increase in the terms of trade since mid 2016 was expected to unwind over the next few years.”

Commodities still rising, but most base metals got left behind

The commodities rally continued to chug along during today’s Asian session. However, base metals were mixed, with most printing losses.

Precious metals scored more gains.

  • Gold was up by 0.28% to $1,233.48 per troy ounce
  • Silver was up by 0.80% to $16.736 per troy ounce

As mentioned earlier, base metals were mixed but mostly in the red.

  • Copper was down by 0.39% to $2.529 per pound
  • Zinc was down by 1.01% to $2,546.25 per dry metric ton

Oil benchmarks still winning, albiet not as much as yesterday.

  • U.S. crude oil was up by 0.45% to $49.07 per barrel
  • Brent crude oil was up by 0.41% to $52.03 per barrel

Persistent optimism over Saudi Arabia and Russia’s agreement on extending the oil cut deal is likely sustaining the commodities rally. Also, the U.S. dollar index was down by 0.12% to 98.69 for the day when the session ended, which may have helped sustain demand for commodities as well.

As for the slide in base metals, market analysts attributed that to worries over signs that China’s economy may be slowing down.

Iron ore recovers

Most base metals got a pounding today, but iron ore was not one of them. Dalian iron ore rose by 2.6% to 474.50 yuan per dry metric ton.

Market analysts attributed this to higher Chinese steel prices. And higher steel prices, in turn, was attributed to expectations of lower supply after the Chinese government’s crackdown on Chinese steel mills that fail to meet pollution standards.

Mixed risk sentiment in Asia-Pacific

Another mixed performance for equity indices in the Asia-Pacific region today. This time, however, there was no clear trend since equity indices were going their seperate ways, so risk sentiment was likely mixed as well.

  • Australia’s ASX 200 was up by 0.26% to 5,853.40
  • New Zealand’s NZX 50 was down by 0.30% to 7,407.61
  • The Shanghai Composite was up by 0.10% to 3,085.19
  • Hang Seng was down by 0.21% to 25,319.00
  • The Nikkei Index was up by 0.14% to 19,897.50
  • KOSPI was up by 0.12% to 2,293.51

Major Market Mover(s):

AUD & NZD

The Aussie and the Kiwi showed strength initially, likely because of the commodities rally. However, both began encountering sellers after most base metals began retreating. Also, the more pessimistic parts of the RBA meeting minutes appeared to weigh down on the Aussie, since it began turning lower after the RBA meeting minutes got released, but about an hour before the Kiwi also began to retreat.

AUD/USD rose to a session high of 0.7422 then dropped to a session low of 0.7435 then closed up by 10 pips (+0.14%) to 0.7405, AUD/JPY rose to a session high of 84.52 then dropped to a session low of 84.01 then closed down by 10 pips (-0.13%) to 84.23, AUD/CHF rose to a session high of 0.7402 then dropped to a session low of 0.7371 then closed down by 2 pips (-0.03%) to 0.7385

NZD/USD rose to a session high of 0.6906 then dropped to a session low of 0.6879 then closed up by 11 pips (+0.16%) to 0.6890, NZD/CHF rose to a session high of 0.6875 then dropped to a session low of 0.6847 then closed up by 4 pips (+0.07%) to 0.6857, NZD/JPY rose to a session high of 78.50 then dropped to a session low of 78.08 then closed down by 6 pips (-0.08%) to 78.21

JPY

The yen was the best-performing currency of the session. There was no clear catalyst and risk sentiment was a bit mixed. However, U.S. 10-year bond yields were down by 0.23% to 2.333%, which may have given the yen some relief.

USD/JPY was down by 28 pips (-0.25%) to 113.49, CAD/JPY was down by 7 pips (-0.09%) to 83.35, GBP/JPY was down by 20 pips (-0.14%) to 146.50

Watch Out For:

  • 6:45 am GMT: French final CPI (no change from 0.1% expected)
  • 8:00 am GMT: Italian preliminary GDP (0.2% expected, same as previous)
  • 8:30 am GMT: Headline (2.6% expected, 2.3% previous) and core (2.2% expected, 1.8% previous) reading for U.K. CPI
  • 8:30 am GMT: U.K. RPI (3.4% expected, 3.1% previous) and HPI (5.4% expected, 5.8% previous)
  • 9:00 am GMT: Euro Zone flash GDP (0.5% expected, same as previous) and trade balance (€18.8B expected, €19.2B previous)
  • 9:00 am GMT: ZEW German economic sentiment (22.3 expected, 19.5 previous)