Australian Dollar
Multiple tailwinds helped the Australian Dollar trend bullishly on Friday, with the ‘Aussie’ enjoying the general risk-on atmosphere. Domestic data was supportive, with the AiG Performance of Manufacturing Index for June rising to 51.8. Iron ore prices firmed, although Goldman Sachs warned that Chinese steel demand was likely to wane over the next two years. The fact that Australians would head to the polls on Saturday to vote in the country’s rare ‘double-dissolution’ election, potentially voting in their fifth Prime Minister in three years, didn’t seem to unnerve investors.
Tomorrow sees the Reserve Bank of Australia (RBA) meet to decide upon monetary policy. Some analysts have already speculated that the RBA will cut interest rates in order to pre-empt ‘Brexit’ volatility at this meeting, although others believe policymakers will hold off for the time being.
Sterling
The Pound fell on Friday due to comments late Thursday afternoon from Bank of England (BoE) Governor Mark Carney that strongly suggested a UK interest rate cut was on its way. Traders were further shocked when Chancellor George Osborne announced he was abandoning his targets to return government finances to surplus by the 2019-20 fiscal year. While this unnerved investors due to how quickly after the vote the Chancellor felt it necessary to abandon his goals, many economists pointed out that Osborne had been highly unlikely to meet his targets anyway, even without a ‘Brexit’.
The BoE’s financial stability report is due out tomorrow and will be read with great interest by investors given the current circumstances.
Euro
Strong domestic data clashed with weak appetite for safe-haven assets to put the Euro on a mixed footing on Friday. Overall, the common currency made gains verses the majors, although commodity currencies like the Australian Dollar and the New Zealand Dollar pulled ahead. Eurozone manufacturing PMIs all improved by more than forecast, although even with this uptick the French manufacturing sector remained firmly in contraction. Unemployment across the Eurozone t lower, dropping to 10.1%.
No high-impact Eurozone data is set for release during the coming week. What data is available shows the state of the Eurozone economy before the UK’s ‘Brexit’ vote. Considering the widespread consensus is that ‘Brexit’ will have a huge impact upon the Eurozone economy, data from before the paradigm-shifting vote is unlikely to be given much heed by investors.
US Dollar
The US Dollar slumped yesterday as traders turned their attention back towards high-risk assets like the Australian Dollar. The ‘Greenback’ remained weak across the board, with a small climb above opening levels against Pound Sterling being one of the few exceptions to the rule. An upcoming ISM Manufacturing index release further muted appetite for the US Dollar, with traders awaiting the result of the key report before positioning themselves.
Influential Non-Farm Payrolls data is set for release on Friday. The previous month’s figure shocked the markets after clocking in at under a quarter of what was forecast. A strong recovery back to levels more in-line with recent reports is expected; if job creation remains weak, however, the US Dollar could face severe headwinds on the suggestion that the labour market is significantly weakening.
Canadian Dollar
The Canadian Dollar trended bullishly towards the end of Friday’s session, despite the weak position of the oil markets. WTI oil was managing to hold gains, but Brent was down nearly -1.9%. There was no domestic data released and the markets were closed due to the national Canada Day holiday, so the ‘Loonie’ was left to react to market sentiment. The impact of small developments was amplified due to the thin trading volumes.
Canada’s headline data release this week will be Friday’s unemployment rate figures for June.
New Zealand Dollar
With risk appetite firmly on, the New Zealand Dollar was able to trend bullishly on Friday. Global stocks also advanced as market confidence returned. There was no domestic data set for release, but even the above-expectations result from the US ISM manufacturing index failed to particularly hobble the ‘Kiwi’. This was because expectations of a US rate hike have dropped off since the UK’s ‘Brexit’ vote, so it would have taken a lot more than a single piece of strong data to counteract the headwinds global risk appetite was creating for the US Dollar.
Speculators will be hoping for a rise in milk prices at Tuesday’s GlobalDairyTrade auction, as this would cause a strong advance for the New Zealand Dollar.
Data Released
July 5th 05.30 AUD Reserve Bank of Australia Rate Decision (JUL 5) 1.75%
July 5th 10.30 GBP Carney Publishes BoE Financial Stability Report
July 5th 13.00 NZD Dairy Auction Avg. Winning Price MT (JUL 5)
July 8th 13.30 USD Change in Non-Farm Payrolls (JUN) 180k
July 8th 13.30 CAD Unemployment Rate (JUN)