Market Review for June 13, 2018

The FED and the USD in Focus, with One Eye on Inflation and the GBP

Key stats released through the Asian session this morning were on the lighter side, limited to June’s Westpac Consumer Sentiment figures out of Australia.

For the Aussie Dollar, the Westpac consumer sentiment index rose by 0.3% in June, following a 0.6% fall in May, with the index up 6.1% year-on-year to 102.2.

  • The finances v a year ago sub-index rose by 4.5%, offsetting most of May’s 6.5% fall.
  • The expectations for finances for the next 12-months sub-index rose by 2.8%, following May’s 0.5% gain, supported by the May budget, though both finance indexes sit below their longer run averages.
  • The economic outlook over the next 12-months sub-index fell by 2.8%, with the outlook for the next five years sub-index falling by 3.1%, the weaker numbers coming in spite of a solid GDP number out of Australia during the week of the survey.
  • The unemployment expectations index rose by 5.7% to 126.9, raising concerns over labour market conditions in the coming months.

The report noted that consumer sentiment had seen the best run of sentiment reads in the first half of the year since 2014. On the downside, the index remained well below levels associated with a robust consumer, with views around family finances remaining downbeat.

The Aussie Dollar showed a muted response to the numbers, moving from $0.75731 to $0.75675 upon release of the figures, before easing to $0.7567 at the time if writing, down 0.08% for the morning.

Elsewhere, the Japanese Yen was down 0.28% to ¥110.68 against the U.S. Dollar, while the Kiwi Dollar was up 0.07% to $0.7012 at the time of writing, the Aussie Dollar under pressure following some relatively mixed readings from within the consumer sentiment report, as the markets look ahead to the FED’s monetary policy decision.

In the equity markets, it was a mixed start to the day, the Nikkei bucking the trend, up 0.42% at the time of writing, supported by a weaker Yen, while the Hang Seng, CSI300 and ASX200 saw red, the CSI300 leading the way, down 0.71% through the morning.

For the EUR, key stats scheduled for release through the morning are limited to finalized May inflation figures out of Spain and April’s industrial production and employment numbers out of the Eurozone. Barring any material deviation from prelim figures, the Eurozone’s industrial production figures will likely be the key driver from a data perspective, production expected to fall in April.

Outside of the stats, Italian politics remains centre stage, as the coalition government reassures the region that Italy will remain in the EUR, while looking to reduce debt.

The EUR was down 0.02% to $1.1743, with today’s stats and any further nose from Italy the key drivers through the day.

For the Pound, it’s another big day on the data front, with May inflation figures scheduled for release this morning. A slight pickup in the annual rate of inflation and a jump in the producer price input index are forecasted, which would be a positive for the Pound, though Brexit continues to be an issue, with the British PM struggling to find a solution on Ireland.

At the time of writing, the Pound was down 0.08% to $1.3361, with the prospects of a rate hike by the FED putting pressure on the majors through the early part of the day.

For the US Dollar , it’s a quiet day on the data front, with key stats through the session limited to May’s wholesale price inflation figures. Outside of the data, the FOMC monetary policy decision and release of its economic indicators and rate statement ahead of a Powell speech are scheduled that will be the key driver for the Dollar today.

A forecasted uptick would be considered a positive for the Dollar, though the markets will be scouring the rate statement and going through the economic projections to get a sense of where the rate path is heading for the remainder of this year and for next year, a rate hike largely priced in for this month.

Economic data has been impressive of late and the annual rate of inflation has seen a pickup, though a continued willingness to allow a short-term overshoot left the effects of the latest inflation figures relatively muted on the Dollar.

At the time of writing, the Dollar Spot Index was up 0.08% to 93.891, with the FED and the Oval Office likely to be the key drivers through the day.

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