Australian Dollar
Falling fears of a ‘Brexit’ vote in the UK referendum caused markets to backpedal on their recent risk-aversion. Global stocks made a bullish recovery, with the Australia ASX closing up 1.66%, while London’s FTSE 100 leapt up 3.4% during the European session. Blazing risk appetite helped the Australian Dollar make a strong advance, with the currency performing particularly well against the US Dollar.
The Reserve Bank of Australia’s (RBA) latest meeting minutes are set for release today. Comments following the latest interest rate decision suggested that the RBA was moving away from its easing bias, so minutes which further reflect this could help to push the ‘Aussie’ further.
Sterling
The Australian Dollar slumped against Pound Sterling yesterday after a series of polls over the previous few days showed that the ‘Remain’ campaign had clawed its way back into the lead, or had at least drawn level with the ‘Leave’ side. Such a narrow margin may not seem to be particularly positive news, but Pound Sterling went bullish. The Australian Dollar’s slump was partly due to the fact that ‘Remain’ had been significantly down in the polls before the weekend, so there is potential for the side to gather even more support before the vote on Thursday. Also, analysis of previous referenda has shown that undecided voters have historically tended to vote in favour of the status quo; even if the two campaigns are neck-and-neck in the polls those who haven’t yet made up their minds could still secure a ‘Remain’ victory.
UK borrowing data is due for release today, but it is likely to be just as overlooked as yesterday’s significant year-on-year slowdown in Rightmove House Prices.
Euro
Recovering confidence in the UK’s future as a part of the European Union helped the Euro trend bullishly against many of its peers yesterday. The day’s mixed data was largely overlooked. Producer price growth accelerated on the month, while the annualised decline slowed to -2.7%. Construction output fell -0.4% on the year, but the previous -0.5% decline was revised up to growth of 0.5%. The common currency was weakened against assets such as the Canadian Dollar and Australian Dollar thanks to surging risk appetite, however. Bundesbank’s warning that the German economy is facing a second-quarter slowdown was largely ignored.
‘Brexit’ fears look likely to dominate all of the major currencies over the coming days, so today’s ZEW surveys could be overlooked with just two days to go until the UK goes to the polls.
US Dollar
Strong risk-appetite and a lack of US data on the economic calendar caused the US Dollar to slump yesterday. Markets returned to risk currencies and stocks, with safe assets such as the ‘Greenback’ and the Japanese Yen falling dramatically. Further adding to US Dollar headwinds was an analysis of Presidential candidate Donald Trump’s economic policies by Moody’s, which found that his plans would cause a prolonged US recession and be responsible for the loss of -3.5 million jobs.
There is no US economic data set for release today, with the ‘Buck’ looking set to be moved by fears of the impact of a ‘Brexit’ on the US economy. The UK employs one million workers in the US, as well as having invested US$0.5 trillion into the States, so a weaker UK economy in the event of a ‘Brexit’, should forecasts prove correct, could have a significant impact upon the US.
Canadian Dollar
The Canadian Dollar was mixed yesterday, advancing against the Euro and trending bullishly against the US Dollar. The ‘Loonie’ slumped against Pound Sterling and other commodity currencies thanks to the latest ‘Brexit’ developments. Commodity appetite was strong, with crude oil surging back towards US$50 per barrel, but risk-appetite bolstered the ‘Aussie’ and ‘Kiwi’ to a greater extent. Headwinds came from a worse-than-expected wholesale sales figure for April, which showed that sales only recovered to 0.1%, rather than the predicted 0.5%, after falling -0.8% in March.
Canadian retail sales data is due out on Wednesday, but with the UK’s EU membership vote following the day after, it remains to be seen if the markets will be focussing on anything other than the referendum.
New Zealand Dollar
Demand for high-performing assets boosted the New Zealand Dollar yesterday, with the ‘Kiwi’ making strong gains against all its commonly-traded peers bar Pound Sterling. The advance came in spite of disappointing domestic data. The Westpac consumer confidence index dropped from 109.6 to 106.0, with respondents less confident on the long-term outlook of the domestic economy and concerned about the impact the ‘Brexit’ referendum, while the Performance of Services Index for May dropped from 57.8 to 56.9.
There is no data due from New Zealand today.
Data Released
June 21st 11.30 AUD RBA June Meeting Minutes
June 21st 11.30 AUD House Price Index (YoY) (1Q) 7.5%
June 21st 18.30 GBP Public Sector Net Borrowing (Pounds) (MAY) 9.4b
June 21st 19.00 EUR German ZEW Survey (Economic Sentiment) (JUN) 4.8
June 21st 19.00 GBP BOE Holds Second Additional ITLR Operation Around EU Vote