JPY and USD
Safe haven currencies JPY and USD are still on a winning streak this week amid escalating trade tensions. JPY performed better than USD as recent weak labor report, and soft manufacturing number in the U.S. is adding bearish pressure to USD. Moving forward, next Thursday’s FOMC rate meeting will be widely watched as the investors will be keen to know the Fed’s thoughts on the current economy and interest rate, although the market is not expecting a June rate cut. USD could edge lower ahead of the FOMC and JPY could edge higher amid the trade tensions.
AUD and NZD
AUD remains the worst performer among the commodity currencies this week after disappointing unemployment data increased bets of 3 rate cuts this year. NZD slides this morning due to disappointing manufacturing data. Activity grew at its slowest pace in more than 6 years in May and barely remained in expansionary territory. AUD and NZD may however trim their losses if China's retail sales and industrial production figures blow past expectations, strengthening demand for risk assets. Next week, Australia's monetary minutes and PMI results could give more clues on rate cuts. NZ's GDP data will be released which gives up the latest update on its economy's health. CAD was taken for a ride along with crude oil prices as supply concerns arise as a result of the attacks on two oil tankers in the Gulf of Oman. Next week, CAD's CPI and core retail sales data are due for release which could give us clues on the latest health of the economy.
GBP and EUR
Sterling initially rose this week upon stronger-than-forecast labor market data out on Tuesday but pared some gains later as the market focused back on the Brexit turmoil. Moving forward, the uncertainties of Brexit will still cast a shadow on the currency. According to the results of the first round of the leadership selection, it is tough to see how Boris Johnson fails to become prime minister unless he does something truly catastrophic. What matters going forward will be the details on how Johnson intends to tackle Brexit: significant uncertainties ahead could well spell further Sterling weakness over coming days and weeks. Elsewhere, the IMF said the euro-area central forecast is “precarious,” citing trade tensions and Brexit. The IMF comments put the regions’ economic growth concerns back on the table, and EUR could tick lower ahead of next week’s release of PMI numbers.