Euro Drops on Greece Fears, Aussie Dollar Rises With Chinese Stocks
May 26, 2015 (DailyFX.com) Talking Points:
- Aussie Dollar Gains Alongside Chinese Stocks, Euro Drops on Greece Jitters
- US Dollar Looks to Economic Data, Fed-Speak to Guide Rate Hike Outlook
The Australian Dollar outperformed in overnight trade, tracking an advance on China’s Shanghai Composite stock index. The equity benchmark rose for a sixth consecutive day to the highest level in over 7 years. Newswires chalked up the move to follow-through on last week’s announcement of the “Made in China 2025” plan, a 10-year effort meant to upgrade the manufacturing sector. Traders may have bet that the program will benefit Australia – for whom China is the leading export market – and its pivotal mining sector.
The Euro turned lower after ominous comments from Klaus Regling, the head of the ESM bailout fund, renewed worries about Greece-linked instability. Regling said in an interview with Bild that officials were “working day and night” to come up with an accord but cautioned that “little time is left”. He went on to warn that insolvency would result without a deal to get new loans, adding that “even missing a payment to the IMF would be dangerous [and] affect other lenders, like us.”
Looking ahead, a quiet economic calendar in European trading hours will see investors looking toward US news-flow for direction cues. April’s Durable Goods Orders and New Home Sales figures as well as May’s Consumer Confidence report are on tap. Federal Reserve Vice Chair Stanley Fischer is also scheduled to speak on the outlook for the global economy.
US data outcomes have been stabilizing relative to consensus forecasts over the past two months after a sharp downturn in the first quarter. If this proves to precede a turn upward, traders may begin to bring forward the expected timeline for the post-QE Fed interest rate hike. With that in mind, upbeat outcomes on today’s releases coupled with rhetoric suggesting the US central bank remains open to the sooner onset of tightening from Mr Fischer may drive the US Dollar higher. Needless to say, soft figures may inspire the opposite reaction.