AUD pushed higher across the board again Wednesday after retail sales and purchasing manager data came in firm, though the Aussie wasn’t aggressively higher given bank bill yields only rose 2 BP.
Retail sales for May were well above median forecasts, rising 0.5 percent m/m versus the 0.2 percent expected with a 0.3 percent upward revision to +0.1 percent the previous month adding further strength to the numbers. The RBA’s 50bp rate cut at the start of the month probably helped sentiment along with government stimulus payments to households mid-month and may be confirmation that the RBA’s comfortable outlook on the domestic front is justified. There is another 25bp cut in June to filter through into consumer sentiment and spending suggesting next month’s numbers will be equally buoyant.
Earlier, Australia’s services PMI rose to a 5-month high of 48.8 in June but remains below the key 50 contraction/expansion threshold for a fifth month. Yet the details were firm, with the sales index rising above 50 to 50.6, employment gaining 5.1 points to 49.1 and new orders surging 9.9 points to 50.3. An extension to this rising trend will certainly give the RBA more comfort in maintaining its current on-hold stance.
After the NZD suffered a minor “shake” last night following the Wellington earthquake, there was more bad news for the flightless bird early this morning. The fortnightly dairy cooperative Fonterra auction saw dairy prices sliding 5.9 percent across all categories to levels that are close to 20 percent below January’s and will certainly have a negative impact on payout forecasts. NZDUSD remained capped at 0.8060, now a potential triple-top on the hourly charts.
It would appear that China’s services sector is not quite ready to take up the mantle of growth from the manufacturing sector just yet. The HSBC PMI reading for the sector expanded at its slowest pace in 10 months in June having recorded a 19-month high the previous month. The index slid to 52.3 from 54.7 and in complete contrast to the earlier “official” services PMI which indicated accelerated expansion to a 3-month high of 56.7. There was muted market reaction to this data.
It was a rather uninspiring session in the US and EUrope overnight with Wednesday’s US Independence Day holiday likely talking its toll on activity. EURUSD failed to make much headway above 1.26 and slid back following a US think-tank piece speculating on ECB rate cuts this coming Thursday, but losses were limited. GBP was pressured a tad by a weak construction PMI and the ongoing LIBOR scandal. Commodities were firmer leading AUD and CAD higher while the USD caught a bid in the back of better US data.
US factory orders rose strongly in May, gaining 0.7 percent m/m following a revised 0.7 percent decline the previous month and marked the first increase in 3 months with orders for durable goods 1.3 percent higher from a month earlier and those for non-durable goods up 0.2 percent. The ISM reading for New York edged lower to 49.7 in June from 49.9 in May. Wall St posted gains for the third consecutive day with the sharp rise in oil prices helping the energy sector. DJIA closed +0.56 percent, S&P +0.62 percent and the Nasdaq +0.84 percent.
Data Highlights
US Jun. ISM New York Out at 49.7 vs. 49.9 prior
US May Factory Orders out at +0.7% m/m vs. 0.1% expected and revised -0.7% prior
UK Jun. BRC Shop Price Index out at +1.1% y/y vs. 1.5% prior
AU Jun. AiG Performance of Services Index out at 48.8 vs. 43.5 prior
AU May Retail Sales out at +0.5% m/m vs. +0.2% expected and revised +0.1% prior
China Jun. HSBC Services PMI out at 52.3 vs. 54.7 prior
Upcoming Economic Calendar Highlights
(All Times GMT)
Sweden PMI Services (0630)
Sweden Riksbank rate Announcement (0730)
GE PMI Services (0755)
EU PMI Services/Composite (0800)
UK PMI Services (0830)
EU Euro-zone Retail Sales (0900)
US Independence Day Holiday
Andrew Robinson,
SAXO BANK