Money Movements In The Merry Month Of May

May is historically a transition month moving from winter to summer, as vacation season looms ahead and warmer temperatures move across Europe and American. May usually has very few central bank meetings and volumes tend to be a lot lower with several major holidays during the month. This May is no different, April ended in an uproar after the FOMC, ECB and Bank of Japan decisions to sit tight. This week on the calendar is the Reserve Bank of Australia which is expected to follow its brethren, but there is always the possibility that Glenn Stevens will act independently and reduce rates tomorrow by 25bps but one never knows. As markets return from the weekend and the new month unfolds the Aussie is trading at 0.7611 slightly higher than the RBA would hope for while at the same time the kiwi continues to power forward adding 30 points to trade at 0.7007 (NZD/USD). Commodities around the globe are trading in the green as the US dollar continues to fall. The greenback gave up 13 points this morning in the Asian session to fall to 92.89.

The lackluster dollar is weighing heavily on the Japanese yen, which has been power boosted to 106.44 upsetting the plans of the Bank of Japan and Finance Minister Aso who want and need a weak yen to help keep exports rolling out the doors. Japan was on holiday last Friday and has several domestic holidays this week. The euro continues to strengthen after Eurozone GDP beat expectations pushing the shared currency to 1.1475 against the US dollar (EUR/USD) and to 122.16 against the yen (EUR/JPY).

Yesterday, China released its manufacturing PMI data which missed forecast printing at 50.1 against expectation of 50.4 which is a sizable miss, although markets seem to be viewing the results in a positive fashion as manufacturing remained in expansion. Additional lending may keep factories humming longer, yet risks building up debts and adding to redundancies at “zombie firms” that are kept alive by banks’ rollovers. The PBOC signaled less appetite for stimulus last month after the release of economic growth data in the first quarter.

Bloomberg reported that China had an across-the-board rebound in March as corporate profits jumped, and new credit, investment, industrial output and retail sales beat economists’ estimates. Those stronger readings may have the central bank hold off on stimulus for a while. Economists see the People’s Bank of China keeping the benchmark one-year lending rate at a record low 4.35 percent through the third quarter, before cutting it to 4.1 percent in the fourth.

This week has no other major earth shattering data on the schedule until Friday’s nonfarm payroll report which should set up some guidance to what the Fed will do at its June meeting after leaving the door open to a rate increase in its statement two weeks ago. U.S. payrolls probably rose by more than 200,000 in April, showing strength in the labor market. Manufacturing probably expanded at a slower pace, while growth in the service industries held steady, other data this week are expected to show.