Busy Eco Calendar Will Spark Currency Volatility

There is a full calendar today beginning with Australian trade balance numbers as well as retail sales. The big events today are the ECB meeting, which will be followed by Mario Draghi’s press conference and the OPEC producers meeting and the delayed EIA crude oil inventory. There should be lots of trading volatility.

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In a surprise divergence the Aussie dollar fell 17 points while the kiwi gained 7 points. The AUD is trading at 0.7241 and the NZD is at 0.6824. Federated Farmers dairy spokesman Andrew Hoggard said the fall in dairy prices was not unexpected, and had been anticipated by the NZX dairy derivatives market, which had tipped WMP to be down while it was picking a lift in the price of SMP, butter and anhydrous milkfat (AMF). Low dairy prices and the end to earthquake rebuilding are expected to slow New Zealand’s growth in the next year, according to the OECD.

Later in the session, the ECB will deliver its June monetary policy statement while OPEC members meet in Vienna, something that saw the crude oil price recover earlier losses overnight. The euro gained 22 points to trade at 1.1211. “The ECB will be reviewing the OK growth performance and policy progress with its enhanced monetary accommodation announced and now being rolled out,” notes de Garis.

“OPEC is also meeting, presumably to review and give their tick of approval so far to their market share defense strategy even though there were wire reports overnight of an output ceiling.”

There is also a plethora of US labour market data scheduled with weekly jobless claims and the ADP employment report for May due out later in the session. Markets will use both releases, particularly the ADP report, for clues as to what may arrive in the May US nonfarm payrolls report on Friday.

The US dollar eased 20 points to 95.22 ahead of today’s events. The big action was in the Japanese yen which gained against the US dollar and the euro. The USD/JPY dipped 61 points to 108.93 which is expected to upset exports as the yen gets to strong once again. The yen gained after comments from Prime Minister Abe. Abe on Wednesday announced he is pushing back a second-stage hike in the consumption tax, from April next year to October of 2019. Against the euro the yen was trading at 122.14 down 21 points.

During last week’s Group of Seven summit in Mie Prefecture, the leaders “agreed to employ all available policy means to avert another crisis,” Abe told a news conference at his office Wednesday evening, citing what he called growing uncertainties in the global economy.

The greenback dropped against most major peers on the view that the latest economic readings, including consumer confidence Tuesday, weren’t strong enough for the central bank to justify tightening monetary policy again, after liftoff from near zero in December. Fed officials meet June 14-15 to discuss policy, after Chair Janet Yellen said last week that a rate increase would be probably be “appropriate” in coming months. The next major hurdle in terms of economic data comes June 3, with the release of payroll data for May. The consensus among analysts is that the economy added fewer than 200,000 jobs for a second straight month.