This was a busier week on the economic calendar and there was considerable data for the USD. The USD has been on a steady decline since the middle of last year driven by reflation expectations that typically drive the USD lower. The US also has a deficit in its current account balance which means the US imports more than it exports. This keeps the USD weak as dollars are exchanged for foreign currencies. The one big question in investors minds remains whether the Federal Reserve will signal earlier interest rate hikes than 2024. Expect this story to keep driving the USD through the summer weeks.

Other key events from the past week

• AUD: Interest Rate meeting, June 01: The RBA’s meeting saw no change in the stance that the RBA will not be raising interest rates until 2024. This keeps an AUDNZD selling bias in place after the RBNZ’s hawkish shift last week. This is a position also advocated by JP Morgan this week.
• USD: ISM Manufacturing, June 01: The ISM manufacturing index rose higher coming in at 61.2 vs 60.9 expected. However, one worry was hidden in the sub-components as some difficulty was noted by companies struggling to fill jobs.
• Gold: Driven by real yields: Remember that when real yields fall lower, that drives gold prices higher. The one big risk to gold’s recent rise higher is any news of bond tapering from the Federal Reserve. That would cause real yields to rise and pressure gold prices.

Key events for the coming week

• CAD: Interest Rate meeting, June 09: The question for the Bank of Canada will be if they address CAD strength. Governor Macklem recently stated that if the CAD moves a lot higher it could have a ‘material impact on its outlook and how we set monetary policy. Watch out for potential USDCAD gains post the BoC.
• Oil: Key week for oil prices, June 11: Investors will be watching Iranian nuclear talks which are set to resume next week. If talks break down the reduced supply for US oil markets could send West Texas Intermediate higher towards $75.