Australian Dollar
There are uncertain times ahead for Australia following the official announcement by Prime Minister Malcolm Turnbull of double dissolution elections. The date of the elections has been set as the 2nd of July. Investors, deterred by the prospect of political instability, deserted the Australian Dollar yesterday. Further weakness came from the latest Chinese data released over the weekend, which showed that imports had dropped -5.7% when 0.3% growth was forecast.
While today’s ANZ Roy Morgan Weekly Consumer Confidence Index could help to strengthen or weaken the Australian Dollar, the biggest AUD movement is likely to come from China’s data. The Consumer Price Index for April is expected to show a mild uptick to 2.4%, which would likely strengthen the ‘Aussie’ thanks to the suggestion of increased demand within its biggest export market.
Sterling
The latest EU referendum debates, slowing UK house prices and speculation of an interest rate cut from the Bank of England (BoE) weren’t enough to allow the Australian Dollar to make ground on the Pound yesterday. The Pound advanced despite David Cameron startling investors by implying that a ‘Brexit’ could threaten peace within the EU, causing Boris Johnson to accuse the PM of predicting ‘World War Three’. Meanwhile, stories that BoE Governor Mark Carney had been sounding out the UK’s major banks to see whether their balance sheets could withstand an interest rate cut further weakened sentiment.
Today’s trade balance figures will be key for investors. A small reduction in the visible and total trade balance figures is predicted, although the non-EU shortfall is expected to widen from -£3357 million to -£3600 million.
Euro
The Euro was on mixed form yesterday, softening against several currencies while advancing verses others. German factory orders saw a strong rise, increasing 1.7% year-on-year (YoY) in March, while the Eurozone Sentix Investor Confidence index for May crept past the forecast score of 6 to hit 6.2. Concerns over the Greek debt situation provided some headwinds to the Euro advance, however.
German industrial production and trade figures are due for release today, the former expected to tick lower, the latter to edge higher.
US Dollar
The US Dollar was strong overall yesterday, making bullish gains against the Australian Dollar, the Canadian Dollar, the Japanese Yen and the New Zealand Dollar. The below-forecast performance from Friday’s Non-Farm Payrolls continued to weigh on sentiment, however. Chicago Fed President Charles Evans gave a confident outlook on the economy, but opined that the Fed should continue with its ‘wait and see’ approach to monetary policy.
It is a relatively quiet day for US data, although the Federal Reserve’s William Dudley will be making a public appearance in Zurich. His comments could move the US Dollar if he alludes to rate hikes. However, data may overrule the opinions of a Fed member. If China’s CPI prints well, this could shore up confidence in the global economy and therefore lend justification to the arguments in favour of more rate hikes.
Canadian Dollar
The raging wildfire in Alberta continued to undermine the Canadian Dollar yesterday. The blaze has already destroyed a fifth of Fort McMurray, burning at least 1,600 homes and forcing 100,000 people to flee. It is believed that the blaze could take an entire year to bring under control and that the flames have curbed oil production in the country by a quarter. Although this has boosted oil prices (a development that would usually strengthen the ‘Loonie’) CAD is on a downtrend against most of its rivals.
There is little Canadian data due for release this week. With the wildfire continuing to burn in Alberta, damaging homes and businesses and forcing oil production to slow, sentiment within the oil markets could drive the Canadian Dollar over the coming days.
New Zealand Dollar
With the US Dollar strengthening and expectations that the Reserve Bank of New Zealand (RBNZ) will cut interest rates at next month’s policy meeting, investors had little incentive to buy or hold the New Zealand Dollar yesterday. As a result of heightened rate cut bets, the ‘Kiwi’ slumped into negative territory across the board.
Similarly to the day’s Australian data, New Zealand’s credit card spending figures for April may be overlooked in favour of the headline Chinese data today.
Data Released
May 10th 08.45 NZD NZ Card Spending (MoM) (APR)
May 10th 09.30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index (MAY 8)
May 10th 11.30 CNY Consumer Price Index (YoY) (APR) 2.4%
May 10th 16.00 EUR German Trade Balance (Euros) (MAR) 20.6b
May 10th 17.15 USD Fed’s Dudley Speaks in Zurich
May 10th 18.30 GBP Visible Trade Balance (Pounds) (MAR) -£11450
May 10th 18.30 GBP Trade Balance Non EU (Pounds) (MAR) -£3600