FX Pulse

OVERNIGHT

    The USD extended gains further on Thurs, higher against seven out of G10 peers. The dollar index has its biggest move this week, higher to 93.75 from 93.26, led an outsized decline in the Euro, which accounted more than half of the index. Four Fed officials (Bullard, Williams, Lockhart and Kaplan) were on the wire overnight, pretty much towed the party line of a “live” June FOMC meeting with an increased emphasis on the upcoming EU-UK referendum on 23-June (Lockhart cited “a big unknown”) and its implications on U.S policy-making. On economic data, U.S initial jobless claims rose to a five-week high of 274k vs estimates of 260k while continuing claims dropped 9k to 2,121k (2128k est).

    EUR/USD was amongst key laggards, losing 0.7% to 1.1405 from 1.1487 while GBP/USD was relatively resilient, closing almost flat at 1.4485 despite a weaker UK services PMI at 52.3 in Apr vs Mar’s 53.7, lowest reading since February 2013. USD/JPY closed higher for the third straight day but gains stalled ahead of key resistance at 107.50. AUD/USD managed small gains to 0.7465 from 0.7457 but still trades with a largely offered tone with rallies above 0.7500 quickly faded. Separately, current Reserve Bank of Australia (RBA) deputy governor Philip Lowe has been appointed to replace retiring Glenn Stevens at the helm of the central bank for a 7-year term starting 18-Sept. NZD/USD closed flat at 0.6884 and traded small range between 0.6872 and 0.6918.

    Regional currencies ended flat to lower on Thurs. USD/MYR added 0.3% to 4.0050, recapturing above the 50- day MA for the first time since 22-Jan. USD/SGD ended largely flat at 1.3589, with key resistance at 1.36 capping intraday advances in an otherwise non-event session. Thailand and Indonesia were away for holidays on Thurs.

    TODAY’S VIEW

    Key focus today would inevitably be the release of U.S non-farm payrolls (NFP), being one of key pillars that still remain supportive of any near-term Fed rate hike whilst other U.S economic data has trickled down of late. The USD will also be receiving this payroll print at the weakest since the Dec 2014 NFP that was released in early Jan 2015. Based on Bloomberg survey, consensus is looking at 200k new jobs added in April from March’s 215k while the unemployment rate is expected to improve to 4.9% from 5.0%.

    AUD/USD fell 0.8% to 0.7400 in early Asia trade after the RBA, in its quarterly statement revised its inflation forecast to be between 1 to 2 percent in 2016, lower from the 2 to 3 percent forecast in February. Based on the Australia OIS, the market has now priced in another 25bps rate cut from 1.75% by the 1- Nov RBA meeting.