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FX Update – US data mixed, while equities trade like they don’t have a care in the world

Overview
Markets traded sideways with little direction on Friday awaiting the US CPI and retail sales data. When released the results were mixed; CPI figures rebounded for April (up 0.2%) although year-on-year at 2.2% lower than an expected 2.3%. April retail sales were lower than forecasted, up 0.4% (expected 0.6%) raising some concerns that Q2 is not seeing continuing positive momentum.  With confidence knocked on the data release, US equities and the US dollar moved lower as speculation weakened around the odds of a June Fed rate hike. However it should be pointed out that the numbers weren’t that bad, they just failed to be as good as anticipated and we believe that the Fed is still on course for a June rate hike.  Read more

Economies of Note

Australia
As we expected there was little discernible market reaction to the Australian Federal Budget, other than the reduction in banking stocks suffered as news of the new tax leaked out earlier in the day. Rating agencies will now be casting an eye over the underlying cash balance projections to see how robust these projections are, it is equally unclear how they will see the new bank tax and what it means for growth and risk. Earlier today Moody’s rating agency noted that although the budget supported their assessment of Australia’s high fiscal strength, the deficit would likely to be wider than the Australian government expects. They also commented that they believed revenues would not rise as fast as the government forecasted and that expenditure would remain higher than that budgeted. Read more

FX Update: Europe breathes a sigh of relief after Macron’s win

Overview
There was an air of general relief by financial markets, with geopolitical risks easing, as polls for once were proved correct and the French Presidential election was won by centrist, pro-business, pro-European Emmanuel Macron in a convincing manner. Although this result was somewhat built into pricing, there was a rally in the EUR on Monday, but this was short lived as attention focused on whether Macron and his fledgling En Marche movement will be able to win a majority in the legislative elections in June. If he does not, this will limit any reforms that he has proposed to make the French economy more efficient and lower unemployment, curtailing his effectiveness as President.  Read more

Economies of Note

Australia
As expected the RBA left rates on hold at its Tuesday meeting. Rates have remained at a record low 1.5% since last August. Economic data continues to be mixed with unemployment stubbornly high at 5.9%, retail spending weaker and inflation remaining at near record lows. In a speech presented yesterday by the RBA Governor he commented that the key risk to the economy from any fall in house prices or rising interest rates, is what might happen to consumer spending. Read more

FX Update – NZ data this week should support the Kiwi dollar

Overview
Geopolitical risks continue to outweigh economic factors as market drivers, with the French elections, North Korea and US political machinations all contribution to the mix. The final poll for the French Presidency will be this Sunday and although the centrist candidate Macron is now expected to win, there remain a large number of undecided votes and right wing, anti-Euro Marine LePen has run a solid campaign. Look for choppy European markets in the run-up to the weekend. Read more

FX Update: NZD remains subdued ahead of the election

Overview
U.S. stocks surged higher to begin the week as Hurricane Irma came ashore in Florida with a less catastrophic result than anticipated and the perceived threat of a North Korean missile test failed to materialize. As Florida dealt with one of the worst storms in its history, investors took a separate and distinct outlook away from the potential human toll. Read more

Economies of Note

Australia
Australian dollar trading has been choppy over the last 24 hours ranging from 0.7871 to 0.7950, initially influenced by better-than-expected Chinese manufacturing PMI and Australian private capex figures. This uptick, however, turned out to be short-lived with a drop to 0.7871 a major support level. Read more

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