The dollar continued to march higher yesterday as some mixed results from fundamental data and Geo Political concerns failed to impact the recent trend. The RBA produced its now usual damp squib for Aussie traders earlier in the day which leaves the path open for further downside in the AudUsd from an interest rate differential perspective. In the UK we saw much worse than expected Manufacturing numbers which helped the Cable to drop further to fresh lows around 1.3600 and added to the sentiment that the MPC will not raise rates this month and across the pond in Canada the Loonie continued to trade hard as stronger GDP numbers came out to battle with a bit of a drop in the Oil price.
We’re still seeing headlines and stories on the various trade issues coming across the news wires but for the moment they are having little impact, however the rhetoric is not universally positive and any confirmation of a break down in progress could add volatility and downside risk to the markets. US representatives have already said that they have a contingency plan to just pack up their bags and head home if the situation is unsatisfactory when they head to China this week and we’ve heard similar sentiment with regard to the upcoming Nafta negotiations, whether these are negotiation tactics or not, only time will tell.
It’s another big day ahead for the market culminating in this months Fed Funds Rate Announcement and FOMC Statement, however we’ve got some decent tier 1 data due for release before we get there. It’s fairly quiet through the Asian session but we have the second PMI number out of the UK today in the form of the Construction numbers and the risk continues to sit with the downside for UK data and the Cable. This is followed by the latest Euro Flash GDP release. Into the New York session and we have the US ADP Non-Farm Employment and Crude Oil Inventories due before we hit the Fed much later in the session. The majority of the market are expecting the Fed to hold fire this month and are looking for a Hawkish Hold from them with a June hike looking odds on, but stranger things have happened in the market and a surprise hike is not totally off the board which would send the greenback soaring to even higher levels.