The AUDUSD opens essentially unchanged at 0.6922 this morning. The NZDUSD opens flat at 0.6542.
It was another benign night on the currency markets. The USD edged higher against a basket of currencies, but was flat relative to the AUD and NZD ahead of a busy day on the New Zealand data front (see below).
The AUD drew support from the barnstorming run in iron ore prices. However, AUD strength was mitigated by the widening AU-US interest rate differential, ahead of the expected RBA rate cut on Tuesday 4th June. This rate cut is almost fully priced in by the markets.
The USD and US Treasuries benefitted from ‘safe haven’ buying amid China-US trade tensions, to which there is no end in sight, and a strong rise in US consumer confidence.
The yield on the benchmark 10-year US Treasury fell to 2.26%, a level last seen in October 2017, and is now 9 basis points below the rate on the US 3-month bills. This inversion is often a sign of an impending recession.
The EUR weakened as the markets remain uneasy about the future of the EU as Eurosceptic and right-wing parties gained seats during the past weekend’s European parliamentary elections. In addition,Italian Deputy Prime Minister said the European Commission could fine Italy EUR 3 billion for breaking EU debt and deficit rules.
The GBP languished near 4-month lows against the USD as the jockeying and promises rampu up in the race for the UK Prime Ministership. Some candidates have announced they will be happy with a no-deal Brexit, should they get the top job.
On the domestic front, it is a busy day in New Zealand:
9:00am - RBNZ Financial Stability Report
11:00am - RBNZ Governor Adrian Orr press conference on the Stability Report
1:00pm - ANZ Business Confidence figures
1:10pm - Governor Orr testifies before Parliament on the Stability Report
Global equity markets were mostly lower on the day - Dow -0.5%, S&P 500 -0.5%, FTSE -0.1%, DAX -0.4%, CAC -0.4, Nikkei +0.3%, Shanghai +0.6%.
Gold prices fell 0.5%% to USD$1,279 an ounce. WTI Crude Oil prices dipped 0.3% to US$58.98 per barrel.
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