Australian Dollar
The Australian election may have yielded an uncertain result, with the final counting set to be completed today, but the ‘Aussie’ trended bullishly yesterday. Economists warned that the continued political uncertainty generated by another hung parliament would harm the economy. However, ratings agencies downplayed claims that this could see Australia lose its prized AAA credit rating. Domestic data was largely negative, with building approvals posting a markedly more severe decline than forecast. Global risk-appetite helped keep the Australian Dollar strong.
The Reserve Bank of Australia (RBA) will announce its latest policy decision today. A rate freeze is expected; another reason the ‘Aussie’ was strong yesterday.
Sterling
June’s shock construction PMI result allowed the Australian Dollar to gain bullishly on Pound Sterling. A slowdown in growth had been expected, but the actual score of 46, down on the previous month’s 51.2, showed that the sector had contracted significantly. This undermined what little strength Sterling had displayed earlier in the day; despite pre-referendum data being largely moot, the poor score showed that the construction industry would be facing post-‘Brexit’ headwinds from a much weaker position than originally thought.
The UK services PMI is due for release today. Investors are likely to be particularly worried about the outcome of this release given the much worse-than-expected performance of yesterday’s construction index. Also key today is the Bank of England’s (BoE) Financial Stability Report.
Euro
A potential Italian banking crisis soured the Euro yesterday, with the common currency largely in negative territory verses the majors. Italian banks are currently struggling with a large amount of debt, with around €200 million of that deemed insolvent. While the EU leaders have agreed to an additional €150 billion in liquidity measures for Italian banks, they are unwilling to help with the recapitalisation. Despite EU legislation stipulating that creditors, not the taxpayer, should be made to fund banking bailouts, Italian Prime Minister Matteo Renzi has declared he may be forced to use government funds to rescue the financial sector.
A slew of low-impact PMIs are scheduled for release today, as are the Eurozone retail sales figures for May.
US Dollar
The US Dollar was weak yesterday, in part due to the fact that the markets were shut as the States celebrated its 240th Independence Day. Risk-appetite boosted commodity correlated assets, although gold saw a rise on safe-haven demand thanks to expectations of additional stimulus from countries including the UK, Japan and China. The UK’s vote to ‘Brexit’ seemed to have inspired and reinvigorated dormant independence groups in the US, with trader uncertainty over the state of the US economy not abated by the discussions of independence movements for Texas and California.
There is no impactful US data due for release today, but two Chinese PMIs and the RBA rate decision could affect the ‘Greenback’.
Canadian Dollar
The Canadian Dollar put on a mixed performance yesterday, strengthening against safe-haven assets while losing out to its more popular commodity cousins. Crude oil wavered, although it still held a position of relative strength, with Brent crude above US$50. A leading indicator for Canada suggested economic activity was on the uptick thanks to rising commodity prices, posting its strongest rate of growth so far this year.
All of Canada’s data for today – the Business Outlook Future Sales and Bank of Canada Senior Loan Officer Survey – have already been released.
New Zealand Dollar
The New Zealand Dollar trended bullishly yesterday on strong risk-appetite. A report by the Treasury calmed investors after suggesting that financial market volatility in the wake of a ‘Brexit’ would only have a minimal and temporary impact upon the New Zealand economy. While long-term impacts could be more keenly felt, including further increasing the country’s record high rate of immigration, the report nonetheless eased market fears.
The latest GlobalDairyTrade auction is set to take place today and the result will have a significant impact upon the New Zealand Dollar.
Data Released
July 5th 14.30 AUD Reserve Bank of Australia Rate Decision (JUL 5) 1.75%
July 5th 18.30 GBP Markit/CIPS UK Services PMI (JUN) 52.8
July 5th 19.00 EUR Eurozone Retail Sales (YoY) (MAY) 1.7%
July 5th 19.30 GBP Carney Publishes BOE Financial Stability Report
July 5th 22.00 NZD Dairy Auction Avg. Winning Price MT (JUL 5)