Australian Dollar
While the Reserve Bank of Australia (RBA) held interest rates at 1.75% at yesterday’s policy meeting, the Australian Dollar still slumped. The accompanying policy statement suggested that the Bank was looking ahead to the end-of-month inflation data before acting. This did nothing to lessen trader bets that further monetary easing was on its way, keeping the ‘Aussie’ weak. Further headwinds were created by the latest trade balance data, which unexpectedly showed a significant widening of the deficit in May.
The only Australian economic release due for today is a speech by the RBA’s Guy Debelle.
Sterling
The Australian Dollar undulated against the Pound yesterday. Initially AUD/GBP extended a strong lead, with investors holding back from the UK asset until the Bank of England (BoE) published its Financial Stability Report. The fact the BoE unwound some capital buffer requirements to free up lending helped to calm the markets. AUD/GBP began to cede gains, but the trend was quickly reversed and the ‘Aussie’ extended even stronger gains than before. Sentiment was harmed as a leading European law professor pointed out the many barriers to securing a ‘Norway style’ trade deal with the EU, while news that more than one property investment fund suspended trading further unnerved investors.
Only low-impact UK data is due for release today, which is highly unlikely to have an impact upon Sterling given the high odds of further ‘Brexit’ volatility.
Euro
Investors were taking advantage of the Euro’s low trade weighting yesterday, buying into the common currency while it was potentially undervalued. The day’s slew of Eurozone PMIs largely printed above forecasts, as did retail sales. The services PMI pointed towards a GDP slowdown in the second quarter, however. Safe-haven demand also helped the Euro to advance.
As well as German factory orders data, another slew of Eurozone PMIs are set for release today.
US Dollar
Demand for secure assets saw the US Dollar trending bullishly yesterday as commodities, stocks and high-yield assets like the Australian Dollar slumped. The ‘Greenback’ racked up significant gains against all but its safe-haven counterparts. The Yen strengthened further due to it being regarded as a safer bet than the ‘Buck’, while the Euro saw stronger demand due to its low trade weighting.
US trade balance and mortgage applications figures are due to be released today, although market sentiment could continue to be the main driver of movement for the US Dollar.
Canadian Dollar
The Canadian Dollar was largely weak yesterday, although it held opening levels against the Australian Dollar and charged bullishly against Pound Sterling. Weakness can be attributed to a fresh bout of risk-aversion, which saw a rout in the oil markets. Brent Crude dropped -2.9%, while WTI Crude extended losses of over -3.2% during the session.
The only Canadian data set for publication today is the international merchandise trade figure for May. Movement in the oil market looks set to remain volatile, which could be the central mover of the Canadian Dollar today.
New Zealand Dollar
The New Zealand Dollar was mixed yesterday, weakened by safe-haven demand. As a result, the ‘Kiwi’ slumped against safe-haven assets while at the same time enjoying status as the most popular commodity Dollar on the market. Its position was weakened overall, however, after the latest GlobalDairyTrade auction resulted in a -0.4% decline in dairy prices.
There is no data due from New Zealand today.
Data Released
July 5th 16.00 EUR German Factory Orders n.s.a. (YoY) (MAY) 0.9%
July 5th 17.30 EUR Markit Germany Construction PMI (JUN)
July 5th 17.30 AUD RBA’s Debelle Gives Speech
July 5th 21.00 USD MBA Mortgage Applications (JUL 1)
July 5th 22.30 USD Trade Balance (MAY) -$40.0b