Morning Brief – Stronger US GDP

The main focus during the Asian session was Australian data, which showed Australia’s trade surplus widened to AUD 11.79 billion in May 2023 from a downwardly revised AUD 10.45 billion in April.

This caused the AUDUSD and AUDNZD pair to tank. This was because the Trade Balance had the smallest surplus in eight months, and beat market forecasts of AUD 10.5 billion gain, as exports rose more than imports.

Shipments grew by 4.4% from the previous month to AUD 57.77 billion, mainly boosted by increases in non-monetary gold, with total exports to China, the country’s largest trade partner rising by 9%.

Meanwhile, imports advanced by 2.5% to a four-month high of AUD 45.98 billion amid robust domestic demand. It was the export data that was really the worry for markets.

Markets also reacted to Federal Reserve Bank of New York President John Williams spoke early in the session, saying the June Federal Open Market Committee pause was the correct call but that the Committee may have to raise rates again, data dependent.

Williams speak was basically giving indications that the FOMC has not finished hiking yet, so it was largely a hawkish speech towards rates. This could keep the US dollar bid.

The committee meet later this month and a 25-basis points rate hike is getting pencilled in for now, awaiting more data in the weeks ahead though. Starting with jobs data this coming Friday then CPI on the 12th.

Notably, during the Asian session People’s Bank of China set the USD/CNY reference rate much lower than was expected. The offshore yuan swung around on the news but has since come back to be little changed on the day.