The Australian, New Zealand and Canadian dollars all weakened on the back of carry trade liquidation. In fact, the New Zealand dollar did not turn negative until the late US session.
There was no further intervention by the Reserve Bank of New Zealand last night although Bollard did warn that the stretched economy is making the inflation target far more difficult to achieve. These words confirm that despite the intervention, the RBNZ still intends to raise interest rates this year. New Zealand business confidence is due for release tonight and we are expecting a sharp deterioration. Australian business confidence on the other hand increased from 13 to 15 in the month of May, which is in line with the overall improvements that we have seen in the economy. Like New Zealand, Australia is still expected to raise interest rates this year. Meanwhile softer oil prices pushed the Canadian dollar lower since first quarter productivity was actually stronger than expected. We expect the movements in the equity markets to continue to drive the price action in the commodity currencies.