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XTB TRADEBEAT

Customs union hopes boost GBP, AUD benefits from jobs report

Summary:

  • The UK is expected to tell the EU it is prepared to stay in customs union beyond 2021
  • Australian jobs release unveils constantly robust long-term trends
  • NZ Jacinda Arden’s government shows its first budget, NZD benefits

US yield continue marching higher, but a rise of the US dollar has slowed down over the recent hours. It could stem from the fact that we were offered some upbeat releases from other economies including the UK. According to the Telegraph reports the UK will tell the EU it is prepared to stay in customs union beyond 2021. Earlier this week PM May’s top ministers agreed on a new "backstop", called as a lifeline, to avoid hard Irish border. It needs to be said that even as Theresa May opts for leaving the EU’s customs union and allowing the country to forge its own trade deals across the globe, a temporary concession could be necessary. Namely, UK ministers involved in Brexit negotiations agreed that the UK should try to stay aligned with the customs union if technology needed to operate borders under one of the government’s proposals is not ready in time for 2021. Keep in mind that the UK is due to leave the block in March next year. These revelations have been GBP positive as it has gained traction being the best major currency in the G10 basket in the morning.

link do file download linkThe GBP bounced off its local support line nearby 1.3460 therefore a move toward 1.3610 might be expected. However, until the pair keeps plodding below this level it’s hard to envisage any larger gains. Source: xStation5

The Australian dollar is second best currency trading 0.3% up against the US dollar after the April’s employment report beat expectations. Employment grew 22.6k exceeding the median estimate at 20k, and more importantly the rise was driven solely by full-time jobs (+32.7k) while part-time jobs subtracted 10k. At the same time the unemployment rate ticked up 0.1pp to 5.6%, but this move was fully offset by the same scale increase of the labour force participation rate. It’s worth noticing that the latter reached its highest point since the data started collecting in 1978. By and large, long-term trends remain firm, and it should sooner or later (possibly later) translate into higher wages, but do not expect any stunning rises.

link do file download linkThe backdrop of the Australian jobs market remains rosy, dormant wage growth is a fly in the ointment though. Source: Macrobond, XTB Research

Finally, let’s focus on New Zealand from where we knew updated budget forecasts. It is the first budget from the Jacinda Arden’s government, and it looks quite encouragingly. The details show the government decided to slash 2017-2018 GDP forecast from 3.3% to 2.6% bumping up its estimates for subsequent two fiscal years. In terms of estimations with regard to a surplus/deficit we got upward revision for this and incoming two fiscal years whereas projections for 2020-2021 and 2021-2022 were reduced, but anyway each period is anticipated to hold a noticeable surplus. The budget also contains forecasts as for bond issuance at 8 billion NZD instead of 7 billion NZD predicted previously. As a result, the NZ dollar is trying to continue its pullback begun on Wednesday, and looking at a weekly time frame one may notice that we are getting closer to a possible reversal on the kiwi.

link do file download linkThe NZ dollar could witness a healthier bounce against the greenback as the pair has been in a free-fall during the recent five weeks. Source: xStation5

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