It’s All Eyes on the FED and the Greenback

Earlier in the Day:

It was a quieter day on the economic calendar, with key stats limited to manufacturing figures out of Australia and employment numbers out of New Zealand.

Volumes were on the lighter side through the Asian session with a number of major markets closed, including HK, Japan, and Singapore.

For the Aussie Dollar,

The AIG Manufacturing Index rose from 51.0 to 54.8 in April, coming in well ahead of a forecasted 51.0.

According to the latest Manufacturing PMI report,

• The production index jumped by 5.3 points to 58.1, with new orders up by 5.6 points to 55.6.
• Finding support from a weaker Aussie Dollar, the exports sub-index rose by 3.2 points to 53.9.

While the production and new order figures were positive, labor market numbers were less so.

• The Employment sub-index slid by 5.1 points to 51.5, with the average wages sub-index falling by 3.5 points to 57.7.

Across the sectors,

• Food and beverages led the way, with the F&B PMI rising by 1.6 points to 61.8. The building, wood, furniture & other products PMI saw the largest monthly increase, up by 3.3 points to 57.6.
• 2 sectors remained in contraction, these being machinery & equipment (44.6) and metals products (44.7). Both reported a greater pace of contraction at the start of the 2^nd quarter.

The Aussie Dollar moved from $0.70475 to $0.70481 upon release of the figures. At the time of writing, the Aussie Dollar was up 0.07% to $0.7053.

For the Kiwi Dollar,

The unemployment rate fell from 4.3% to 4.2% in the 1^st quarter, which was in line with forecasts. Quarter-on-quarter, employment fell by 0.2%, however, which was worse than a forecasted 0.3% rise. In the 4^th quarter, employment had risen by 0.1%.

According to figures released by NZ Stats,

• The total number of unemployed stood at 116k in the 1^st quarter, down by 10k.
• While the unemployment rate ticked down, the employment rate also fell, down from 67.8% to 67.5%. This was equivalent to a 0.3% fall.

The Kiwi Dollar moved from $0.66571 to $0.66276 upon release of the figures. At the time of writing, Kiwi Dollar was down 0.36% to $0.6651.

Elsewhere,

With the Japanese markets closed for the week, risk sentiment continued to provide direction for the Yen. At the time of writing, the Japanese Yen was down 0.06% to ¥111.49 against the U.S Dollar.

The Day Ahead:

For the EUR,

There are no material stats due out of the Eurozone today, with the major European markets closed for Labour Day.

Direction through the day will be hinged on economic data out of the U.S later today and the FED’s press conference and release of the FOMC Statement.

GDP numbers out of the Eurozone on Tuesday showed that the economy saw a slight pickup, in spite of quite dire private sector PMI numbers through the quarter. The better than anticipated numbers supported the EUR’s return to $1.12 levels.

It remains to be seen whether the numbers ease pressure on the ECB to act. What may be clearer later today is whether the ECB or the FED will move first.

At the time of writing, the EUR was up 0.03% at $1.1218.

For the Pound,

While a relatively quiet day on the economic calendar, April’s manufacturing PMI will provide the Pound with direction later this morning.

The PMI hit a 13-month high in March supported by record rises in both stocks of inputs and finished goods. Of greater significance was an upward trend in new orders, suggesting an uptick in manufacturing activity at the start of the 2^nd quarter.

Figures today will indicate to what extent the March uptick was as a result of Brexit preparations. Any pullback in stocks of inputs and new orders would bring into question the sector’s outlook.

Outside of the stats, there’s little progress on Brexit in spite of the EU parliamentary elections being just around the corner. Talks of a 2^nd EU Referendum continue to do the rounds…

At the time of writing, the Pound was up 0.08% to $1.3042.

Across the Pond,

It’s a big day for the Greenback. Key stats due out of the U.S include April’s ADP nonfarm employment change figures and manufacturing PMI numbers. On the manufacturing PMIs, the focus will be on the market’s preferred ISM survey.

While the ADP nonfarm employment change numbers are skewed in favor of the Dollar, the focus will likely be on the ISM PMI later in the day.

The main event of the day will be the FOMC monetary policy decision, however. While there’s no expectation of a shift in policy, the FOMC statement will garner plenty of attention.

Will the FED give any hint of a need to begin considering a rate cut. The latest inflation figures and consumption and investment figures suggest so. U.S President Trump would certainly not object to such a shift in sentiment…

On the earnings front, key earnings results are limited to The Kraft Heinz Co, which will unlikely have a material impact on the major indexes.

At the time of writing, the Dollar Spot Index was up 0.02% to 97.497.

For the Loonie,

It’s a quiet day ahead on the economic calendar. The lack of stats will leave risk sentiment to provide direction through the day.

The Loonie was up 0.07% at C$1.3378, against the U.S Dollar, at the time of writing.