Dollar saw a significant rebound overnight, a rally that carried on into the Asian trading session today. This surge is mainly attributable to short covering, particularly as central bank rate hikes this week failed to drive an extended selloff in the greenback. In fact, Dollar is currently the second strongest performer for the week, closely trailing Canadian. However, the possibility of a shift in this ranking by the week's end remains on the table.
Meanwhile, Euro has suffered broad losses today, driven by disappointing PMI data. While a July rate hike by ECB seems almost certain, the outlook beyond that point is clouded in uncertainty. Australian and New Zealand Dollars, have taken a severe hit following sell-off in Hong Kong stocks and continuous decline in Chinese Yuan. Despite being among the week's worst performers, Yen is experiencing a slight recovery against other currencies, with the notable exception of Dollar.
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Australia's PMI Manufacturing index stayed put at 48.0 in May, marking the joint-lowest reading since May 2020. On the other hand, PMI Services fell from 53.7 to 51.8, causing Composite PMI to decrease from 53.0 to 51.2. Highlighting the strong correlation between the pick-up in the services PMI, housing market, rising population growth, and job advertising, he concluded, "Last week's labour market data on employment and wages have bought the RBA some time, but the Flash PMIs highlight that it is still too early to call an end to the monetary policy tightening cycle."
In today's quiet Asian session, forex markets have largely stayed within a narrow range, with minimal response to positive PMI data from Australia and Japan. Yen has seen a slight recovery but continues to be the weakest performer of the week, followed closely by Sterling and Dollar. On the flip side, New Zealand Dollar remains the leader, with Swiss Franc and Aussie following, while Canadian and Euro are mixed.