USD WEAKENS WHILE YEN STRENGTHENS AS REFUGE TO SAFETY

JPY strengthened the most since mid-January as the flight to safety caused by the trade wars, continued on Friday and during today’s Asian session. US and Mexican officials prepare for negotiations, after the US announced its intentions to impose tariffs on Mexican imports. The US tariffs on Mexican imports caught the markets by surprise analysts noted, as Mexico is considered a major trading partner of the US. Mexico’s president had hinted that his country could tighten controls at the US border, in an effort to defuse the tensions with President Trump. Simultaneously the US-Sino trade wars are also still ongoing, with eyes turned to the Osaka G20 meeting and a possible meeting between the leaders of the US and China. If tensions continue to fuel a risk averse climate in the markets, then safe havens could strengthen further.

RBA Interest rate decision

In the late Asian session tomorrow (04:30,GMT), RBA is to announce its interest rate decision and is widely expected to cut rates by 25 basis points reaching +1.25%, if compared to current level of 1.50%. The market seems to have priced in such a development and currently AUDOIS imply a probability of 85.68% for such a scenario. According to analysts the bank’s intention may be to cut rates further and some even speculate up to 3 rate cuts in 2019. Should the bank cut rates and accompany its decision with a dovish accompanying statement to pave the way for further rate cuts, we could see the Aussie weakening substantially.

Other economic highlights, today and early tomorrow

Today during the European session we get UK’s manufacturing PMI for May and in the American session we get the US ISM manufacturing PMI for May.

As for the rest of the week:

On Tuesday, we get from the UK the Construction PMI for May and Eurozone’s preliminary CPI for May. On Wednesday, we get from Australia Q1’s GDP from the UK the services PMI for May and the US ISM non Mfg PMI for May. On Thursday, we get from Australia April’s trade balance, Germany’s industrial orders for April, ECB’s interest rate decision and from Canada the Ivey PMI for May. On Friday, we get from Germany the industrial production for April, Germany’s Trade balance for April, the US employment report for May, as well as Canada’s employment data for May.

AUD/USD H4