- The Australian dollar eased lower in quiet trade on Thursday.
- There was little reaction to weak Australian economic data nor dovish remarks from a senior US Federal Reserve official.
- Chinese manufacturing PMI and Australian private sector credit are the main data highlights in Asia on Friday. Core PCE inflation for April is the headline act in the second half of the session.
The Australian dollar eased lower on Thursday in another quiet session for currency markets.
Here’s the scoreboard at 7am in Sydney on Friday.
AUD/USD 0.6911 , -0.0006 , -0.09%
AUD/JPY 75.76 , -0.04 , -0.05%
AUD/CNH 4.7879 , -0.0071 , -0.15%
AUD/EUR 0.6207 , -0.0006 , -0.10%
AUD/GBP 0.5480 , 0.0002 , 0.04%
AUD/NZD 1.0613 , -0.0007 , -0.07%
AUD/CAD 0.933 , -0.0018 , -0.19%
“Neither of these weaker-than-expected releases hurt the Aussie, testament to a lot of bad news currently being priced into the currency,” said Ray Attrill, head of FX strategy at the National Australia Bank (NAB).
The main theme of the session was modest US dollar strength despite a big downward revision to core PCE inflation in the March quarter and growing speculation the Federal Reserve will cut official interest rates this year.
“US Q1 GDP was revised down by 0.1% to 3.0%,” said Attrill.
“More pertinent and relevant to the decline in US yields is that the core PCE deflator was revised down by a chunky 0.3% to just 1.0% from 1.3%.”
Dovish comments from Richard Clarida, the Fed’s vice chair, also did little to hurt the greenback during the session.
“If the incoming data were to show a persistent shortfall in inflation below our 2% objective or were it to indicate that global economic and financial developments present a material downside risk to our baseline outlook, then these are developments that the Committee would take into account in assessing the appropriate stance for monetary policy,” Clarida said in a speech.
According to Attrill, Clarida’s comments have clarified “in many people’s minds the answer to the questions of whether low inflation proving more than transitory would itself be enough to get the Fed to ease”.
“The answer appears to be ‘yes’,” Attrill said.
Turning to the day ahead, the health of China’s economy will be in focus with the release of the government’s official manufacturing and non-manufacturing PMIs for May at 11am AEST.
While there is no forecast for the non-manufacturing print, the manufacturing PMI is expected to slide to 49.9, according to the median economist forecast offered to Reuters, down from 50.1 in April.
Elsewhere, Australian private sector credit figures for April will be released at 11.30am AEST. Most interest will be in the housing component.
Japan will also release Tokyo inflation, unemployment, industrial production, retail sales, construction orders and household confidence data during the session. Despite the busy calendar, it’s been a long time since Japanese data has had a significant impact on either the yen or broader currency markets.
Later in the session, other data highlights include German retail sales and inflation, Italian and Canadian Q1 GDP, UK consumer credit along with personal consumption and incomes data from the US for April, including include core PCE inflation.
The latter is the Fed’s preferred inflation measure, and will likely dictate market movements in the latter parts of trade in the absence of any further headlines on US-China trade negotiations.
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