Australian Dollar
Risk appetite returned to the market yesterday, pushing the Australian Dollar into a bullish recovery against its most commonly traded peers – with the exception of the New Zealand Dollar and Pound Sterling. However, headwinds for the ‘Aussie’ appeared in the form of two leading Australian economists, who attacked the Labor party’s claims over corporation tax. Labor have been arguing that cuts to corporation tax are simply a ‘giveaway’ for big business, whereas Chris Richardson of Deloitte Access Economics and Shane Oliver, Chief Economist for AMP, cited research which showed that corporation tax was the biggest drag on the economy and therefore the best candidate for cuts.
If yesterday’s semblance of normalcy continues today, the Australian Dollar could find itself moved by the HIA New Home Sales figures, although the chances are higher than not that further ‘Brexit’ developments will dominate most of the movement in major currencies.
Sterling
Trader panic following the vote for a ‘Brexit’ abated to a degree yesterday, causing the Australian Dollar to slump as Pound Sterling began to recover. Investors took advantage of the Pound’s low trade weighting, pushing it higher despite a number of political developments further adding to the atmosphere of uncertainty. Standard & Poor’s and Fitch both downgraded the UK’s credit rating, while Angela Merkel became the latest EU politician to rubbish the idea that the UK would be able to access the single market without paying in or accepting free movement.
With huge unknowns still hanging over the UK, investors are likely to pay little heed to today’s upcoming house price, mortgage approvals and consumer credit figures.
Euro
Yesterday’s moment of calm in the markets – warned by many analysts to be only temporary – helped the Euro to recover some of the heavy losses incurred since the UK voted for a ‘Brexit’. European Central Bank (ECB) President Mario Draghi gave his first speech since the UK’s historic vote, although the policymaker focussed on his call for global central banks to unify their policy, rather than attempt to competitively devalue their currencies. That Draghi avoided the topic of a ‘Brexit’ helped keep the markets from further bearishness.
German inflation data is set for release today. If yesterday’s market calm prevails, the CPI figures could have an impact upon the Euro, but ‘Brexit’ fears will remain dominant.
US Dollar
With markets tentatively moving back towards risk-taking, safe-haven currencies like the US Dollar, Swiss Franc and Japanese Yen all saw marked depreciation. The fall came despite the fact that the final measure of GDP for the first quarter of 2016 was revised higher-than-expected, up from 0.8% to 1.1%, instead of the forecast 1%. While the US Treasury Secretary claimed the ‘Brexit’ would not have a significant impact upon the US economy, multiple economists announced that they would be downgrading their forecasts.
Today’s high-impact personal consumption expenditure figures will give an insight into the path of US inflation, although with a ‘Brexit’ promising at least two years of market uncertainty, the Federal Reserve is highly unlikely to raise interest rates in the short-term, meaning traders won’t be as interested in inflation data as before.
Canadian Dollar
The Canadian Dollar slumped yesterday in a surprising move, considering oil prices were recovering from the previous day’s decline, during which the ‘Loonie’ had advanced. WTI managed to extend gains of around 2.7%, while Brent made advances in the region of 2.4%. The Canadian Dollar remained weak, however. Headwinds came from an assessment of Canada’s oil-based economy by a leading government think tank, who offered an uncharacteristically frank warning that Canada would be left behind if it did not diversify away from oil in the next decade and a half.
With no Canadian data set for release today, the ‘Loonie’ remains at the mercy of the oil markets.
New Zealand Dollar
Resurging risk appetite helped the New Zealand Dollar trend bullishly against a number of its peers yesterday. Murray McCully, New Zealand’s Foreign Minister, told reporters that steps had been taken to protect New Zealand from the fallout of the UK’s decision to ‘Brexit’. Global stocks were recovered, with UK and European indexes rising significantly, while Asian stocks had largely closed in positive territory.
There is no New Zealand data set for release today.
Data Released
June 29th 11.00 AUD HIA New Home Sales (MoM) (MAY)
June 29th 16.00 GBP Nationwide House Prices n.s.a. (YoY) (JUN)
June 29th 22.00 EUR German Consumer Price Index (YoY) (JUN P)
June 29th 22.30 USD Personal Consumption Expenditure Core (YoY) (MAY)