Australian Dollar
Suggestions that the Reserve Bank of Australia (RBA) does not intend to cut the official cash rate (OCR) in the near future boosted the Australian Dollar yesterday. This perception came from the latest RBA meeting minutes, in which the board identified steady employment, above-expectation growth and on-track economic transition away from mining. The minutes did warn that inflationary pressures remained below target and that the Australian Dollar was still too strong, but investors were cheered by the dwindling possibility of looser monetary policy.
The Westpac Leading Index for May is set for release today. Whether or not it will actually be noticed by the markets, due to the intense focus on the ‘Brexit’ debate, remains to be seen.
Sterling
Two dire ‘Brexit’ warnings were largely ignored yesterday, although the Australian Dollar managed to make small gains against the Pound. Famously pessimistic economist Nouriel Roubini, who predicted the financial crisis, warned that leaving the EU could stall the UK economy, cause a recession and see Sterling drop. Billionaire investor George Soros, who infamously made a rumoured one billion Pounds when the UK crashed out of the Exchange Rate Mechanism on ‘Black Wednesday’ has predicted a ‘Brexit’ would cause an even more significant fall for the Pound than was seen in 1992. However, city banks largely rejected the Bank of England’s (BoE) liquidity auction, suggesting that the city was confident either in its preparedness for volatility or that the UK would not vote for a ‘Brexit’.
There is no UK data due for release today, although with the referendum just one day away, it would largely have been ignored even if there were.
Euro
The German Constitutional Court ruled in favour of an unused European Central Bank (ECB) monetary policy tool yesterday after it was challenged by a group supported by over 30,000 German academics, politicians and economists. The Overt Monetary Transfer programme would have allowed the ECB to buy unlimited bonds from countries in financial trouble, but German lawmakers argued this violated Germany’s constitution and was therefore illegal. The court rejected this, however, relieving investors. The Euro remained weak despite a surge in the German ZEW survey results, with economic sentiment rising from 6.4 to 19.2 instead of falling to 4.8. Risk appetite was on thanks to dwindling ‘Brexit’ fears, leaving little appetite for the common currency.
There will be no Eurozone data released today but the Euro has been driven largely by market sentiment recently, so the markets are unlikely to notice the absence.
US Dollar
The US Dollar was mixed yesterday. The ‘Greenback’ made bullish gains verses other safe-haven assets such as the Euro and the Japanese Yen, but slid against the Australian Dollar, New Zealand Dollar and Pound Sterling. Investors had only recently begun to accept that a ‘Brexit’ could have a strong negative effect on the US economy, so dwindling fears of a ‘leave’ vote improved confidence and made the ‘Buck’ a more attractive prospect. Janet Yellen said more-or-less what everyone had been expecting, so her words changed little in the markets.
Mortgage and house price data for June and April respectively is due from the US today. If the markets remain calm, these could have an impact, with a slowdown predicted for house price growth.
Canadian Dollar
The Canadian Dollar declined yesterday as crude oil racked up losses of more than -2% on both the WTI and Brent indexes. Fears that the strength of the oil markets compared to a few months ago will see more companies increasing or resuming production, thereby increasing market surplus, weakened ‘black gold’. Also weighing on the ‘Loonie’ was a forecast from Moody’s that warned a Canadian housing crash could cost lenders nearly -CA$12 billion.
Canadian retail sales are expected to show growth of 0.8% for April. The Canadian Dollar is fairly well insulated from ‘Brexit’ fears, so the ‘Loonie’ could still find itself impacted by the data.
New Zealand Dollar
There was no economic data from New Zealand yesterday, leaving the ‘Kiwi’ in the grips of market sentiment. Risk appetite caused bullish appreciation, helped by an industry report that suggested every Dollar invested in stimulating the tech sector could generate a 300% return in terms of economic growth.
New Zealand credit card spending figures for May are due to be published today. With the ‘Brexit’ referendum debate controlling market sentiment, it is likely that the ‘Kiwi’ will be moved by global forces once again today.
Data Released
June 22nd 10.30 AUD Westpac Leading Index (MoM) (MAY)
June 22nd 13.00 NZD Credit Card Spending (YoY) (MAY)
June 22nd 21.00 USD MBA Mortgage Applications (JUN 17)
June 22nd 22.30 CAD Retail Sales (MoM) (APR 0.8%
June 22nd 23.00 USD House Price Index (MoM) (APR) 0.6%