The US$ resumed its rally on Tuesday after a brief period of consolidation and has broken higher against all the major pairs. Cable led the way lower, in thin conditions due to the EU holiday, after the UK PMI manufacturing fell to a 17 month low, increasingly hinting that a near term BoE hike is highly unlikely. The Euro and Chf were dragged down by Cable, while the commodity bloc currencies were also under pressure after the RBA decision to leave rates unchanged provided little assistance to the Aud$, which in turn dragged the Kiwi lower. In other markets, Stocks were mixed but basically unchanged from the previous session while the metals took a hit, with Gold now looking to break sub $1300, under pressure from the stronger dollar. WTI fell by almost 2%, as signs of rising US oil production renewed focus on the rapid pace of US output ahead of supply data expected to show that crude stockpiles rose for a second-straight week.
In terms of data, the ISM US factory activity/prices paid data were mixed. The factory figures slowed for a second straight month in April, with manufacturers complaining about rising commodity prices in the wake of the Trump administration’s tariffs on steel and aluminium imports, while the figures also showed a shortage of skilled workers, which together with the proposed import tariffs are causing bottlenecks in the supply chain.
US Apr ISM Manufacturing PMI, 58.3 vs expected 57.3, 59.3 prev
US Apr ISM Mfg Prices Paid, 79.3 vs expected 78.0, 78.1 prev
US Apr ISM Mfg Employment Index, 54.2, vs expected 57.0, 57.3 prev
US Apr ISM New Orders Index, 61.2, 61.9 prev
Wednesday begins with the NZ Q1 Jobs report (exp Headline rate 4.5%, Q1 Change; +0.4%), the Australian TD Inflation and the Caixin China Mfg PMI (exp 50.9). The EU Q1 Preliminary GDP (exp 0.4% mm, 2.5% yy) will then be released ahead of today’s FOMC Meeting and Statement, in what will be a busy session. No hike is expected but the Fed are likely to maintain their hawkish tone, which will continue to underpin the US$.
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