Rotten week for Australian dollar | NZD/GBP shoots up to five-and-a-half-week high

The Australian dollar had a pretty rotten week last week, hurt by the fact there was almost no domestic data available to provide support. However, thanks to weakness in the pound, AUD/GBP was able to end the week at a 24-day high of £0.5822.

Meanwhile, NZD/GBP shot up to a five-and-a-half-week high of £0.5520, thanks to positive trade data and confidence of a strong government budget surplus for the financial year just ending.

The Australian dollar suffered from a combination of lacking domestic data and generally cold risk-appetite last week. The focus was on the US FOMC meeting minutes, which had the potential to drastically change demand for risky currencies like AUD and NZD.

Meanwhile, data concerning construction work in the first quarter, released on Wednesday, showed a larger-than-expected decline of -0.7%, which analysts claimed would drag on economic growth for the beginning of the year.

After weakening to eleven-month lows during May, the New Zealand dollar began making a strong recovery last week, partly thanks to upbeat domestic data releases. Trade figures had been forecast to show a weaker surplus of NZ$267 million, but instead revealed that the surplus had widened to NZ$578 million.

Additionally, news that the government was expecting to record a much larger-than-anticipated budget surplus for the past financial year also pushed NZD higher.

Both the Australian and New Zealand dollars will be heavily influenced by Wednesday’s Chinese manufacturing PMI. This will show how fast, if at all, industrial activity continued to grow in May. Considering China is a key export market for Australia and New Zealand, signs that output in its dominant sector is weakening would bode ill for trade.

Additionally, head of the Reserve Bank of New Zealand (RBNZ) Graeme Wheeler will appear before a Parliament Select Committee on Wednesday, which may yield some insight into the future of monetary policy.