Earlier in the Day:
It was a relatively quiet start to the day on the economic calendar this morning. The Japanese Yen was in action in the early part of the day. On the monetary policy front, RBA meeting minutes from the early May meeting were also in focus this morning.
For the Japanese Yen
1st estimate GDP numbers for the 1st quarter were in focus this morning.
Year-on-year, the economy contracted by 5.1%, compared with 11.7% growth in the 4th quarter. Economists had forecast a contraction of 4.6%.
Quarter-on-quarter, the economy contracted by 1.3% versus a forecasted contraction of 1.2%. In the 4th quarter of last year, the economy had expanded by 2.8%.
- Capital expenditure fell by 1.4%, quarter-on-quarter, versus a forecasted 1.1% rise. In the 4th quarter, expenditure had risen by 4.3%.
- External demand slipped by 0.2%, quarter-on-quarter, which was in line with forecasts.
- Private consumption fell by 1.4%, following a 2.2% rise in the 4th quarter of last year. Economists had forecast a 2.0% decline.
The Japanese Yen moved from ¥109.182 to ¥109.282 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.05% to ¥1091.0 against the U.S Dollar.
For the Aussie Dollar
The RBA meeting minutes drew plenty of attention this morning, following the hold on policy earlier in the month.
Salient points from the minute’s considerations for monetary policy section included:
- The global economy had continued to recover from the pandemic, with the outlook strong for 2021 and next year.
- In spite of the rebound, the recovery remained uneven and some countries were yet to contain the virus.
- Australia’s economic recovery had been stronger than expected, leading to an upward revision to the central forecasts for GDP growth.
- The RBA expects the unemployment rate to continue to fall from its current level of 5.6%.
- Wages and price pressures remained subdued, though a pickup in inflation and wage growth was expected.
- Any pickup is expected to be gradual and modest, however.
- Members agreed that, at the July 2021 meeting, the Board would consider whether to retain the April 2024 bond as the target bond for the 3-year yield target or to shift to the next maturity.
- The Board would also consider future bond purchases at the July meeting.
- Future policy decisions would be based on close attention to the flow of economic data and conditions in domestic financial markets.
- Members agreed that a return to full employment is a high priority for monetary policy and would assist in achieving the inflation target.
- As a result, policy would likely need to remain highly accommodative for some time yet.
- Members affirmed that the cash target rate would be maintained at 10 basis points and will not increase until actual inflation is sustainably within the 2-3% target range.
- For this to occur, wages growth would need to be materially higher, which would need significant gains in employment and a return to a tight labor market.
- The Board viewed these conditions as unlikely until 2024 at the earliest.
The Aussie Dollar moved from $0.77928 to $0.77860 upon release of the minutes. At the time of writing, with the Aussie Dollar was up by 0.33% to $0.7790.
Elsewhere
At the time of writing, the Kiwi Dollar was up by 0.43% to $0.7235.
The Day Ahead
For the EUR
It’s a relatively busy day ahead on the economic data front. Key stats include trade data and 2nd estimate GDP numbers for the Eurozone.
The markets will be looking for a pickup in trade terms and upward revisions to GDP numbers to support the EUR.
At the time of writing, the EUR was up by 0.12% to $1.2167.
For the Pound
It’s a busy day ahead on the economic calendar. Employment and wage growth figures are due out later today.
Expect March’s unemployment rate and claimant count figures for April to draw the greatest interest. With the UK economy reopening at the turn of the quarter, the markets will be looking for better employment conditions to support consumption.
At the time of writing, the Pound was up by 0.26% to $1.4171.
Across the Pond
It’s a relatively quiet day ahead on the economic calendar. Housing sector data for April, which includes building permits and housing starts will be in focus.
We don’t expect too much influence on the Greenback, however.
Geopolitics will likely be a key area of focus on the day.
At the time of writing, the Dollar Spot Index was down by 0.05% to 90.119.
For the Loonie
It’s a particularly quiet day ahead on the economic calendar. There are no material stats from Canada to provide the Loonie with direction.
The lack of stats will leave the Loonie in the hands of market risk sentiment on the day.
At the time of writing, the Loonie was up by 0.18% to C$1.2046 against the U.S Dollar.
For a look at all of today’s economic events, check out our economic calendar.