FX Weekly Recap: June 5 – 9, 2023

Dollar dominance was the main theme early in the week, as the bulls continued to charge after the Nonfarm Payrolls report.

However, commodity currencies such as the Australian dollar and the Canadian dollar took center stage after their central banks announced sudden interest rate increases.

In addition, the Canadian dollar was able to benefit from the OPEC+ announcement of voluntary production cuts.

US dollar pairs

However, another bullish May nonfarm payroll result boosted the US dollar against its rivals at the start of the week as dollar traders revived hopes for a June Fed hike rather than a “Fed stall”.

These gains were quickly reversed when the ISM Services PMI came out weaker than expected (market players noted how the price component indicated much slower inflationary pressures), followed by mounting selling pressure after the weaker than expected weekly jobless claims. Update on Thursday.

🔴 descending main arguments

ISM PMI Services It fell from 51.9 to 50.3 in May, reflecting a slower pace of expansion versus an estimated improvement to 52.6.

Factory orders It posted a 0.4% m/m increase in April against an expected gain of 0.8% and a previous increase of 0.6%.

IBD/TIPP Economic Optimism Index It rose for the month of June from 41.6 to 41.7, below the 45.2 consensus

Trade failure It widened from $60.6 billion to $74.6 billion in April, its largest deficit in six months, as exports fell 3.6% while imports rose 1.5%.

Unemployment claims rates For the week ending June 3 it came in at 261k, higher than the expected figure of 236k and the previous reading of 233k.

euro pairs

The lack of top-notch reports kept the euro acting as a counter currency for most of the week, although there is potential for an overall bearish trend as a result of the pessimistic, low-level data released.

Broad mid-week sentiment of risk-off temporarily helped the euro see the green through the middle of the day on Thursday, much of it easing on Friday as the risk-off mood improved ahead of the weekend.

🟢 The main arguments rising

German trade surplus It widened from €14.9 billion to €18.4 billion in April, as imports fell 1.7% while exports rose 1.2%.

🔴 descending main arguments

Producer prices in the euro area Decreased 3.6% m/m in April versus an estimated 3.0% decline, after the previous decline of 1.3%

German factory orders It fell 0.4% m/m in April instead of the estimated 2.7% rise, and the March reading fell to show a sharper decline of 10.9%.

Retail sales in the eurozone It held flat in April instead of posting an expected 0.2% rise, and the March figure rose from a 1.2% decline to just 0.4%.

German industrial productionn rose only 0.3% m/m in April instead of the estimated 0.7% increase, the March reading rose from a 3.4% decline to a 2.1% decline

Sterling pairs

There was not much on the British economy’s agenda during the week, leaving sterling traders to hold out ahead of the Bank of England’s decision later this month.

Mid-level reports came in mostly weaker than expected, particularly when it came to consumer spending and housing, indicating that rate hikes continue to weigh on economic activity.

But risk sentiment seemed to be the main feature for sterling starting Wednesday as it closed higher than most of the major currencies, losing only to the Australian and New Zealand dollars by Friday’s close.

🟢 Ascending main arguments

PMI Construction It improved from 51.1 to 51.6 in May, beating expectations of 50.9 to reflect a stronger pace of industry growth.

RICS home price equilibrium 30% of surveyors who reported a decrease showed prices in their area for the month of May, an improvement over the previous reading of 39%.

🔴 descending main arguments

BRC Retail Sales Control It eased from 5.2% yoy to 3.7% in May, well below expectations of 5.2% and reflecting a sharp decline in spending.

Halifax HPI It showed no change in housing prices for the month of May instead posting an expected rise of 0.2%, noting an improvement over the previous decline which was cut by 0.4%.

Swiss Franc pairs

The Franc has been a strange week, spending a lot of time in the green against most of the major currencies, and it is likely that some traders out there will benefit from remaining focused on the recession speculation.

It was already starting to lose its charm on Thursday, but fortunately for the franc bulls, hawkish comments from SNB Chairman Jordan point to more rate hikes to come.

🟢 Ascending main arguments

Swiss consumer price index It came in line with estimates for a monthly increase of 0.3% in May after remaining flat the previous month

🔴 descending main arguments

Swiss unemployment rate Increased from 1.9% to 2.0% in May rather than flat as the number of unemployed increased by 88k

AUD pairs

The Reserve Bank of Australia surprised the markets by raising interest rates by 0.25% this month instead of holding steady as expected.

Although the Australian dollar also got some support from an upbeat Chinese Caixin PMI released earlier, the high-yielding currency pulled back on Wednesday, likely due to broad inflows from risk-on. It’s possible that traders wanted to take some risk off with the global PMI updates, Australian Q1 GDP and Chinese trade data all disappointing.

But the Aussie bulls were able to take over on Thursday and Friday, perhaps reacting to fresh positive news on Chinese bank rates, potentially fueling speculation of more rate hikes to come.

🟢 The main arguments rising

MI inflation scale It jumped from 0.2% m/m to 0.9% in May, reflecting stubborn price pressures.

ANZ job postings It registered a monthly rise of 0.1% in May, indicating a rebound in employment after three consecutive monthly declines.

Caixin China PMI Services It rose from 56.4 to 57.1 to reflect a stronger pace of industry growth in May rather than the estimated decline to 55.2.

The Reserve Bank of Australia raised interest rates From 3.85% to 4.10% in the June policy statement, citing indications that inflation will continue

🔴 descending main arguments

Australian GDP for the first quarter This came at 0.2% against the expected growth figure of 0.3%, and the reading for the previous period was raised from 0.5% to 0.6%.

Chinese trade surplus It shrank from $90.2 billion to $65.8 billion, as exports fell 7.5% in May while imports fell 4.5% year-on-year.

Australian trade surplus It shrank from A$14.82 billion to A$11.16 billion in May versus an expected figure of A$13.65 billion, as exports fell 5.0% while imports rose 1.6%.

CAD pairs

The Canadian dollar got off to a flying start to the week, thanks to OPEC+’s surprising announcement of voluntary production cuts, but fell later on Monday as weaker-than-expected PMI data fueled risk aversion bets, especially in the outlook for oil prices.

Later, the Canadian dollar got a big boost when the Bank of Canada announced a 0.25% interest rate hike and signaled that it is ready to continue rising until inflation returns to target. But the volatility did not stop there as bulls jumped on the Canadian dollar again as oil prices fell on Thursday as recession bets rose again after weak US employment data.

Fortunately for the bulls, the Canadian dollar was able to recover somewhat on Friday as risk sentiment improved on positive Chinese bank rate news, and closed the week mixed but arguably positive.

🟢 Ascending main arguments

BOC prices raised From 4.50% to 4.75% in the June policy decision, indicating that inflation remains high and monetary policy is not yet sufficiently restrictive

Canadian trade surplus It expanded from C$0.2 billion to C$1.9 billion against estimates of C$0.5 billion in April, as exports rose 2.5% while imports fell 0.2%.

🔴 descending main arguments

Ivy PMI It fell from 56.8 to a three-month low of 53.5 in May, reflecting a slowing pace of industry growth versus an estimated improvement to 57.2.

Building permits It fell 18.8% m/m in April versus an estimated decline of 4.3%, erasing most of the previous gain of 12.3%.

Canadian Employment Report: – 17.3 thousand net job losses in May (forecast +40 thousand); Unemployment rate increased from 5.0% to 5.2%

NZD Pairs

The New Zealand dollar was in full swing, rallying early in the week despite last week’s news of the RBNZ’s shift to a less hawkish interest rate stance.

There wasn’t much on deck from New Zealand either, leaving the New Zealand dollar to take cues mostly from market sentiment and Chinese data points, which was enough to give the bulls a profit at the end of the week as it was the second best performing currency by Friday’s close.

🟢 Ascending main arguments

ANZ commodity prices It rebounded 0.3% m/m in May on higher dairy prices, after a previous decline of 1.7%.

🔴 descending main arguments

Quarterly manufacturing sales in New Zealand It fell 2.8% in the first quarter, after the previous credit rating fell 1.0% from an initially reported decline of 0.4%.

Japanese yen pairs

In the absence of major Japanese catalysts, the yen was also mixed as the Japanese currency seemed to be taking cues from the general market sentiment and counter currency moves discussed above.

After a net positive start to the week, it closed as a big net loss thanks to a positive shift in risk sentiment, likely to do so for comdolls demand after the twice RBA and BoC rate hikes this week and positive Chinese news developments.

🟢 Ascending main arguments

Economy Watchersx improved slightly from 54.6 to 55.0 reflecting stronger optimism against the figure of 55.1

Japan’s final GDP Revised sharply upwards from 1.9% to 2.7% yoy in Q1 2023 due to upward revisions to capital spending and private and domestic demand

Total Japanese bank lending Accelerated from 3.2% to 3.4% yoy (versus 3.1% expected) in May

au Jibun Bank Japan Services PMI Revised to 55.9 vs. the preliminary reading of 56.3 and the April reading of 55.4

🔴 descending main arguments

average cash gain It slowed from 1.3% to 1.0% year-on-year in April for an estimated gain of 1.7%, despite pay increases from labor talks.

family spending A decline of 4.4% year-on-year in April versus an expected decline of 2.2% and an increase of 1.9% earlier.