Weekly Fundamental Roundup, May 24

Yen and dollar up this week

Safe haven currencies JPY and USD are on a winning streak this week again amid escalating trade tensions. USD retraced slightly on Thursday’s soft print of Markit Manufacturing PMI and Service PMI. Moving forward, USD could rebound as the market is not expected to drag based on one weak economic data, especially when Fed’s belief in the current interest rate reduces the market’s speculation of interest rate cuts this year. As the trade war front could spread to more countries after Trump administration moves to impose tariffs on countries with undervalued currencies, JPY could still be favored by investors for next week’s trading.

Sharp losses for the Aussie dollar

Over the week, the AUD was butchered in the wake of the recent dismal Australian jobs, construction output data and ongoing trade tensions; increasing bets for a rate cut this June are sending yields to record lows at 1.53%. Next week, Australia’s building approvals and private capital expenditure data will give us a better idea of the health of the economy. However, investors are likely to focus on China’s PMI that could deliver more negative news as its PMI is set to drop back into contraction territory as pressure from the trade war mounts.

Kiwi and Canadian dollars insipid

NZD and CAD’s better than expected domestic datas failed to lift the currency as falling oil prices and rising US-China trade tension overshadowed. Next week for NZD, its financial stability report, business confidence report and annual budget release will be due. And for the CAD, BoC will deliver their rate statement which is expected to remain unchanged. Their GDP data will also be released, which is something to watch closely.

Volatility in Europe

EUR started the week higher on strong economic data but political uncertainty in Italy dampened sentiment as Matteo Salvini’s probable emergence would mean more budget clashes with the EU. Next week, weak economic data could add on to the bearish pressure. GBP plunged as investors braced themselves of a hard or no-deal Brexit as May is forced to resign. Meanwhile, Boris Johnson, seen as the top contender increases risks of a no-deal Brexit. Given the current outlook, there might be more room for GBP’s decline but caution the volatility any gains in support for pro-EU parties or a chance to reverse Brexit could see a rally in the currency.

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