Bell FX Currency Outlook: Market sentiment turned negative on Friday as poorer jobs data in the US and weaker Chinese PMI figures moved equity markets lower as the possibility of further stimuli from central banks helped prevent the AUD from falling further.
Australia: The AUD traded below .9600 on Friday night as poor European PMI data preceded a weak US jobs report for May where only 69k jobs were created last month compared to expectations of 150k.
With equity markets in Europe already shaky, the poor news on the job front pushed all major indices to finish lower with the Dow registering the single biggest daily loss in 2012 and wiping all the gains achieved from the start of the year.
The Dow fell 2.2% to 12,119 and the NASDAQ was down 2.8% after the German DAX fell 3.4%. The AUD fell quickly after the jobs data trading below .9600 but within an hour the possibility of further central bank stimulus was rumoured and this event saw the AUD recover to over .9700 within an hour or two.
Volatility will be high as analysts are talking of a 50 bps interest rate cut tomorrow afternoon when the RBA meets though most believe a 25bps rate cut is the most likely outcome with another round of quantitative easing from the US Fed a chance.
Later today we see Q1 data for company operating profits and inventories and ANZ job ads that will likely give us an indication of the Q1 GDP figure which we will see on Wednesday followed by the unemployment figure on Thursday.
Majors: Although China's PMI data for May was weaker than expected and the UK's PMI was weaker as well, the telling blow came from the US where private payrolls increased by only 82k and government jobs fell by 13k and downward revisions in jobs of 49k for the previous two months were made.
In addition, softer numbers for auto sales and manufacturing in May put many doubts about the strength of the US recovery in investors' minds.
Interestingly, European bond yields fell with both Italian and Spanish bond yields falling 16bps and 6bps, respectively. The ultimate fate of the EUR did not escape comment with Spain's Finance Minister de Guindos suggesting that the next few weeks are crucial for the EUR's survival and famous speculator George Soros noted that Germany has only three months to head off the crisis.
Germany's Merkel expressed again her opinion that Germany will not support the issue of Eurobonds.
Indicative of the concern in financial markets, gold rose over 4% to USD1,624 an ounce. On a positive note, Ireland's referendum on the EU Stability and Growth Pact was passed with 60.3% voting for it after 50.6% of people turned out to vote.
4 JUNE NZ Public Holiday
UK Public Holiday
AU TD Securities Inflation MAY
ANZ Job Advertisements MAY
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