SMATS FX Weekly Market Report | Monday 01 June 2020

USD

A steady stream of poor economic data, geopolitical tensions with China and negative sentiment saw the US Dollar take a heavy hit last week. This week the US jobs data, in the form of their non-farm payrolls, on Friday is expected to be in the biggest catalyst for the Greenback as analysts expect to see a loss of 8.9 million jobs in May. On Thursday, we expect to see the balance of trade rise slightly from US$-44.8 B to US$-40.0 B. Ongoing protests in America is causing some turbulence in the markets and it could have an impact on the rates this week.

Influences on HKD, SGD & AED

Unfortunately, our exotic currencies were dragged down by a struggling US Dollar last week. Now that the Hong Kong protests have resumed, the HKD has been extremely volatile. Markit PMI numbers for May are due out on Wednesday, for Hong Kong, it is expected to climb from 36.9 to 38.00 while Singapore expect to see a rise from 28.1 to 30.0, United Arab Emirates will be releasing their Emirates NBD PMI for May, it is expected to come out at 45.5 from the 44.1 we saw in April. Singapore will be releasing their retail sales figures for April on Friday, the year-on-year figure is likely to drop by 11% while the month-on-month has been slated to dip by 1.5%.

AUD

The Aussie Dollar topped the forex charts last week as it rode the wave of global risk sentiment and anti-Dollar movements. Tensions between the US and China do not only impact risk sentiment, but it has a larger impact on the AUD, given its trade ties with China. This week, the Reserve Bank of Australia will be making their interest rate decision on Tuesday, no change is expected as policy makers are likely to keep rates on hold at 0.25%. Then on Wednesday, we will have a look into how the Aussie economy has coped in the first quarter when they release their GDP results, it is expected that it contracted by 0.5%. The balance of trade for April along with the retail sales is due out on Thursday, the former is expected to have narrowed from A$10.6 B to A$8.4 B while retail sales has taken an 18% hit.

NZD

The Kiwi Dollar hopped on the risk sentiment boat as the larger economies start to ease quarantine measures and some better than expected economic updates saw the NZD close in the green on Friday. There isn’t much in terms of data reports out of New Zealand this week so they will take cues from the Aussie Dollar and remain on board with how the investors are reacting to risk sentiment and any counter-currency action.

EUR

The Euro was buoyed after the announcement of a new recovery fund from the European Commission to borrow €750 B to aid the economy. This week, all eyes shift towards the European Central Bank as they make their interest rate decision on Thursday, it is likely that they will keep their rates unchanged at 0.00% but Euro traders should keep their eyes out for any updates on the Pandemic Emergency Purchase Program (PEPP). COVID-19 is still making an impact on the economy, but positive developments are being made as quarantine measures are eased.

GBP

Brexit talks, weak updates from the UK economy and further uncertainty around the Bank of England’s next decision saw the British Pound have a topsy turvy kind of week. It is another week that is short of economic reports out of the UK this week. On Monday morning, the PMI results are set to be released, the manufacturing figure is expected to rise to 40.7 from 40.6 while the services PMI is also going to climb from 27.8 to 27.9. Brexit related updates are likely to have a big impact on the Pound this week as EU leaders continue to push for post-Brexit trade negotiations as the Eurozone search for a region-wide recovery plan.