SMATS FX weekly market report | Monday 08 June 2020

USD

Despite the biggest US jobs increase ever in the non-farm payrolls on Friday, the US Dollar struggled against the forex pile, only gaining against the other safe-havens as investors moved towards a more risk-on sentiment and US-China tensions started to impact the attractiveness of the US Dollar. On Wednesday, analysts expect the inflation rate to take a 0.1% hit for May, leaving the headline figure at 0.2% while the core inflation rate has been forecast to show 1.2% for May. The Federal Reserve will be making their interest rate decision on Wednesday, the market largely expects no change from the current rate of 0.25%.

Influences on HKD, SGD & AED

An empty sheet of economic reports out of our exotic currencies will see them influenced by the USD rate and counter-currency action. As the global economy begins to reopen, investors will move away from the safe-havens like the JPY, USD and CHF and into more risky assets, leading to the Dollar weakening. Another key aspect will be the US-China trade negotiations and how that impacts the exports being the two largest economies in the world.

AUD

The unstoppable train of risk-sentiment drove the Aussie Dollar up last week along side the Kiwi Dollar. To aid the positive risk sentiment, Australia released some better-than-expected data reports last week. The NAB business confidence report will be released on Tuesday, it is expected to improve from -46 to -38 for May, which resembles the improving Australian economy. Wednesday will see the Westpac Consumer confidence index improve from 88.1 to 90.0 for June. Counter-currency action should also drive the price of the Aussie Dollar and traders should keep eyes out for the Fed rate decision on Wednesday.

NZD

With New Zealand checking in no new COVID-19 cases to keep their active cases at 0, the NZD has taken top spot this week thanks to positive risk sentiment and of course, being coronavirus free. In a week light of economic data, the Kiwi Dollar will move in line with risk sentiment and against its counter-currencies. Business PMI for May is expected to improve from 26.1 to 28.0 for May when it is released on Friday.

EUR

The European Euro found itself in the red last week on the back of some positive global risk sentiment and counter-currency action. However, the Euro climbed on the back of a large stimulus effort from the European Central Bank on Thursday. This week the Euro will be at the mercy of counter-currency action in the absence of hard-hitting data reports. Germany also upped its stimulus efforts last week they unveiled an additional aid package.

GBP

With the Pound Sterling rising throughout last week despite negative economic updates and some difficulty with Brexit negotiations, it seems likely that the main driver for the Pound last week turned out to be risk sentiment. With another light week of UK data, the British Pound will be moved by Brexit-related updates as a ‘no-deal’ Brexit is once again a concern with expectations of Boris Johnson asking for an extension past the December deadline or to start making plans to prepare for a ‘no deal’ outcome. On Friday, the April 3-month GDP average is likely to have fallen to -12%.