Australian Dollar
Risk appetite was firmly off on Friday following the UK’s ‘Brexit’ referendum announcement. As a result, the Australian Dollar slumped against its peers, with the obvious exceptions of Pound Sterling and the Euro, against which it made bullish gains. Prime Minister Malcom Turnbull was quick to assure Australia that the domestic economy was strong enough to weather any negative headwinds generated by the UK’s decision. Australian investors weren’t convinced, however, with the ASX200 shedding AU$50 billion in the immediate aftermath of the vote.
The first piece of notable Australian data will be Wednesday’s new home sales figures for May, although with the UK promising plenty more market volatility as the fallout from the ‘Brexit’ vote becomes clear, it is unlikely markets are ready to turn their attention back to the calendar just yet.
Sterling
The Australian Dollar stormed ahead against the Pound on Friday, extending gains of over 5% on the result of the UK’s EU membership referendum. After a long and intense night of gradual result declarations, the final count showed that the ‘Leave’ camp held a minor lead, taking 51.9% of the votes. The Pound had already experienced one sharp drop when the first results of the night came in because they showed a stronger-than-anticipated win for the ‘Leave’ camp in Sunderland. Any recovery was quickly eradicated after it became clear the pro-‘Brexit’ side had clinched victory. Prime Minister David Cameron resigned following the defeat, while a motion of no confidence was passed against Labour party leader Jeremy Corbyn. Nicola Sturgeon announced the Scottish government would begin preparing legislation to allow another Scottish independence referendum.
Given the final vote, the chances are that ‘Brexit’ developments will dominate AUD/GBP movement in the near future, rendering what little UK data is set for release this week rather irrelevant.
Euro
Safe-haven demand may have been firmly on, but unsurprisingly the Euro plummeted, at one point extending losses of over -1.2% against the Australian Dollar, -2.4% against the US Dollar and -5% against the Japanese Yen. With nationalist party leaders in France, Italy, the Netherlands, Sweden and Denmark all expressing a desire to replicate the UK’s referendum success with regards to their own EU membership, the future of the European project looked in jeopardy. Mario Draghi tried to assure the markets that the European Central Bank (ECB) was well-prepared to deal with excess market volatility, but unsurprisingly there was little demand for the common currency on Friday.
The preliminary German consumer price index figures for June are set for release on Wednesday. However, with many now forecasting the dissolution of the entire EU thanks to the domino effect of the UK’s ‘Brexit’ referendum success, there could be bigger things on the minds of investors than German price growth.
US Dollar
Investor desperation for safe-haven assets caused the US Dollar to shoot up on Friday. This could prove a problem for the Federal Reserve if profit-taking doesn’t return the ‘Greenback’ to pre-vote levels, as a stronger US Dollar will drive consumer prices down, weakening inflation and delaying the Fed’s attempts to normalise monetary policy. President Barack Obama issued a statement reaffirming the strength of the special relationship between the US and UK. With the potential for trillions of Dollars of UK investment in the US at stake, the ‘Buck’ could find itself moved by ‘Brexit’-based market sentiment over the course of the coming week. There are likely to be more runs towards safe-haven assets, although whether the US Dollar has strengthened to such an extent that it resists further appreciation remains to be seen.
Figures showing a -2.2% drop in May’s durable goods orders were predictably ignored; even the most impactful US data this week, such as Wednesday’s consumer confidence figure, risks the same fate.
Canadian Dollar
Extreme weakness in Pound Sterling and the Euro meant that the Canadian Dollar was not entirely soft during Friday’s turbulence. The ‘Loonie’ gained around 4.5% versus the Pound, but slumped against other majors. With risk appetite off, traders were in no mood to enter the commodity markets and so crude oil saw a dramatic fall away from the key US$50 per barrel mark. WTI oil fell -4.3% to US$47.95, while Brent dropped -4.5% to trend around US$48.60.
Canadian gross domestic product figures are set for release on Thursday and with Canada being largely shielded from market ‘Brexit’ fears – unless they weaken the oil markets – there is a chance the impact of the data could actually register on the Canadian Dollar.
New Zealand Dollar
The New Zealand Dollar fell against safe-haven assets on Friday as risk-aversion gripped the markets. The lack of risk-appetite was clear to see in the performance of global stocks, with the US S&P 500 dropping -2.3% as trading started and the Japanese Nikkei closing down -7.9%.
New Zealand’s trade balance figures are due out today. If the markets have calmed over the weekend, this data could have an impact.
Data Released
June 27th 08.45 NZD Trade Balance (New Zealand dollars) (MAY)
June 29th 00.00 USD Consumer Confidence (JUN) 93.1
June 29th 11.00 AUD HIA New Home Sales (MoM) (MAY)
June 29th 22.00 EUR German Consumer Price Index (YoY) (JUN P)
June 30th 22.30 CAD Gross Domestic Product (YoY) (APR)