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Bob Mason
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Earlier in the Day:

It was a relatively busy day on the economic calendar this morning. The Aussie Dollar and Japanese Yen were in focus early in the day, as was economic data out of China.

Away from the economic calendar, key risks remained in focus, while the Asian markets responded to news from the U.S.

The good news continued to be the COVID-19 numbers that remained on the lower side in spite of the easing in lockdown measures. While plenty of downside risks remain, including consumer sentiment, it’s certainly good news for the markets. A COVID-19 vaccine would address the uncertainty over consumer sentiment globally…

Looking at the latest coronavirus numbers,

On Tuesday, the number of new coronavirus cases rose by 112,694 to 6,470,911. On Monday, the number of new cases had risen by 95,146. While the daily increase was higher than Monday’s rise and 95,878 new cases from the previous Tuesday.

France, Germany, Italy, and Spain reported 938 new cases on Tuesday, which was down from 1,018 new cases on Monday. On the previous Tuesday, 1,535 new cases had been reported. Significantly, all 4 member states reported less than 300 cases each for a 2nd consecutive day.

From the U.S, the total number of cases rose by 21,208 to 1,879,665 on Tuesday. On Monday, the total number of cases had risen by 21,287. On Tuesday 26th May, a total of 19,185 new cases had been reported.

For the Japanese Yen

May’s finalized service sector PMI came in at 26.5, which was up from an April 21.5 and a prelim 25.3.

The Japanese Yen moved from ¥108.719 to ¥108.742 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.10% to ¥108.57 against the U.S Dollar.

For the Aussie Dollar

It was a busy morning for the Aussie Dollar, with housing sector data for April in focus along with May’s service sector PMI.

The headline, however, was 1st quarter GDP numbers, which were expected to be quite dire…

Looking at the stats:

Building approvals fell by 1.8%, following a 2.6% fall in March, which was far better than a forecasted fall of 15.0%. The services PMI continued to struggle in May. The PMI came in at 26.9, which was up from an April 19.5 and prelim 25.5.

In the 1st quarter, the economy contracted by 0.3%, quarter-on-quarter, following a 0.5% expansion in the 4th quarter. Economists had forecast a contraction of 0.3%.

Year-on-year, the economy grew by 1.4% that was softer than 2.2% in the 4th quarter. This was also in line with forecasts. This was the slowest through the year growth since Q3 2009.

According to the ABS,

  • A number of factors hit the Australian economy, including the bushfires and the effects of the COVID-19 pandemic.
  • Government spending limited the impact, with public demand contributing 0.3 percentage points to GDP. This came from a 1.8% rise in government final consumption expenditure.
  • By contrast, public demand detracted 0.8 percentage points from GDP. This came from a 1.1% slide in household final consumption expenditure.
  • Net trade contributed 0.5 percentage points to GDP. Imports of goods fell 3.9%, with imports of services sliding by 13.6%. Exports of services fell by 12.8%.

The Aussie Dollar moved from $0.69680 to $0.69506 upon release of the statement. At the time of writing, the Aussie Dollar up by 0.54% at $0.6934.

From China

The Caixin Services PMI rose from 44.4 to 55.0 in May.

According to the May Caixin Services PMI survey,

  • Business activity and new work rose at the quickest rate since late 2010. It marked the first increase in activity for 4-months.
  • A resumption in business operations and improved client demand led to a first uptick in total new orders since January. The rate of expansion was the sharpest since September 2010 and the historical average.
  • Domestic demand delivered as new export business continued to tumble in May. This weak overseas demand was attributed to the continued lockdown measures in place through much of May.

The Aussie Dollar moved from $0.69506 to $0.69449 upon release of the figures.


At the time of writing, the Kiwi Dollar was up by 0.63% to $0.6411.


The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. May’s service sector PMIs for Italy and Spain are due out in the early part of the European session. Finalized PMIs from France, Germany, and the Eurozone will also draw attention.

We are looking for a services sector rebound to drive hiring and economic recovery. Prior to the coronavirus pandemic, even the ECB had been looking towards services for support.

That then brings Germany’s unemployment figures for May into focus.

The good news, however, is that the EU has agreed on a bazooka of a recovery plan that could see the markets brush aside the numbers.

Dire numbers, however, could test the theory that the recovery will be a swift one to pre-pandemic levels.

At the time of writing, the EUR was up by 0.30% to $1.1203.

For the Pound

It’s a relatively busy day ahead on the economic calendar. May’s finalized services and composite PMIs are due out later this morning.

While downward revisions will test the Pound, updates from EU – UK Brexit talks will likely be the key drivers on the day.

There was a hint of compromise from the UK government in the earlier part of the week. If that translates into a compromise with the EU on fishing rights then there may be the hope of some kind of blueprint…

We have also heard the chatter of a transition period extension that would also be a boost…

At the time of writing, the Pound was up by 0.25% to $1.2583.

Across the Pond

It’s a busy day ahead on the U.S economic calendar. The markets preferred ISM Non-Manufacturing PMI for May and ADP nonfarm employment change figures are due out.

We are expecting another slump in nonfarm. We are not expecting weaker ISM PMI numbers, however.

A fall in the ISM non-manufacturing PMI from April levels would check the market’s buoyant mood.

On the geopolitical front, the markets can’t ignore events in the U.S forever… Trump is heading for the Oval Office exit door at a rapid pace if things don’t change. Or is he?

The Dollar Spot Index was down by 0.24% to 97.438 at the time of writing.

For the Loonie

It’s a busy day ahead on the economic calendar. While economic data is limited to 1st quarter productivity, the Bank of Canada is delivering its June monetary policy decision.

Risk sentiment has picked up and hopes are of an economic rebound that has fueled a rally in oil prices.

Will the BoC see it the same way? Expect a more conservative view, though we’re not expecting the Loonie to sink.

OPEC Plus chatter and U.S EIA inventory numbers will influence, however. The BoC is fully aware of the risks to crude oil price stability and the impact on the Canadian economy. Some Loonie weakness wouldn’t be a bad thing…

At the time of writing, the Loonie was up by 0.11% to C$1.3504 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

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