Australian Dollar
After US Non-Farm Payrolls data significantly underperformed, expectations of long-term delays to a Federal Reserve cash rate increase eased pressure on the Reserve Bank of Australia (RBA). This caused the Australian Dollar to climb versus many of its major peers, although neutral market sentiment slowed ‘Aussie’ (AUD) gains.
Later this morning the Reserve Bank of Australia interest rate decision will dominate trader focus. However, most analysts do not expect the RBA to cut rates. This is because policymakers only recently slashed the overnight cash rate to the record-low 1.75%.
Additionally, fears that cutting rates further will inflate the housing bubble will likely cause delays.
Should the RBA avoid cutting rates the ‘Aussie’ may advance, although market sentiment and US Dollar strength will likely play a greater hand in AUD exchange rate volatility.
Sterling
Responding to recent EU referendum opinion polls that indicate the ‘leave’ campaign will be victorious on June 23rd, the Pound Sterling dived versus all of its major peers overnight. With house price data unlikely to be hugely impactful, and with Sterling sentiment increasingly reduced amid heightened volatility, the UK Pound is likely to hold losses throughout today’s session.
Should another opinion poll indicate a renewed lead for the ‘remain’ campaign combine with reduced trader risk-appetite, however, there is potential for the AUD/GBP exchange rate to cool.
Euro
Reduced Fed rate hike bets allowed the Euro to strengthen versus a number of its major peers overnight despite mixed results from domestic data publications yesterday afternoon. Whilst German Factory Orders saw an unexpected contraction of -0.5% on the year in April, May’s German, French, Italian and Eurozone Retail PMIs all improved upon previous figures.
German Industrial Production data may cause EUR volatility this afternoon, as well as the final figure for first-quarter Eurozone Gross Domestic Product due this evening.
US Dollar
As mentioned above, the dismal Non-Farm Payrolls report last week caused significantly reduced Federal Reserve rate hike bets. Despite this, however, the US Dollar climbed overnight in response to Japanese Yen weakness.
Whilst domestic data is more impactful now that rate hike changes have become more data dependent, there is far chance of significant USD exchange rate movement in response to speeches from Federal Reserve officials and changes in market sentiment.
Canadian Dollar
Oil prices strengthened overnight in response to supply disruptions in Nigeria and comparative US Dollar weakness. This caused the Canadian Dollar to rally versus most of its rivals.
With an absence of domestic data today to affect changes, ‘Loonie’ (CAD) exchange rates will continue to see changes in response to crude oil prices, market sentiment and US Dollar strength.
New Zealand Dollar
Unlike its Oceanic counterpart, the New Zealand Dollar struggled overnight as the drop in whole milk powder prices continues to weigh on investor sentiment.
Later this week the Reserve Bank of New Zealand (RBNZ) interest rate decision is due to take place. Whilst several analysts expect a cut to deal with overvaluation and falling inflation expectations, there is some uncertainty as to how the RBNZ will approach the decision now that reduced Fed bets have eased pressure on policymakers.
Data Released
June 8th 00:00 CNY Foreign Direct Investment
June 8th 00:00 CNY Trade Balance
June 9th 07:00 NZD Reserve Bank of New Zealand Rate Decision
June 11th 00:00 USD University of Michigan Confidence