Australian Dollar
Vote counting continued after Saturday’s general election failed to produce a conclusive result. The Australian Dollar firmed, however, as the Coalition edged further into the lead against Labor, leaving it just four seats short of the 76 needed for a majority. The potential for a return to the status quo cheered investors, who also wanted to avoid a Labor government, as voters have historically believed Labor to be weaker economic managers than a Conservative government.
Today’s AiG Performance of Construction Index for June could provide further ‘Aussie’ movement, although election-related developments could steal trader focus from the data.
Sterling
The markets were still shocked yesterday by the news that three of the largest UK property investment funds had suspended withdrawals on Tuesday. On top of this, the FTSE 250 sank to -10% below pre-referendum levels and speculation of a fresh supermarket price war further weakened sentiment. Shares in Tesco, Morrisons and Sainsbury’s slumped, with the former experiencing a -9% decline. This all allowed the AUD/GBP exchange rate to trend bullishly, no doubt helped by headwinds generated from the publication of the long awaited Chilcot report into the Iraq war.
Industrial and manufacturing production data for May is due out today. Considering the most recent Markit manufacturing PMI showed stronger-than-expected growth, these figures could print above forecast, which would likely be seen as a ray of hope among the gloom and give Sterling a modest boost.
Euro
A slew of poor Eurozone data weakened the Euro yesterday, allowing the Australian Dollar to make bullish gains. German factory orders stalled on a seasonally adjusted basis and declined unexpectedly on a non-adjusted yearly basis. The Markit PMIs all weakened across the board, with the exception of the French retail index. The contraction in Italian retail accelerated even further, as shown by an index score of 40, while Eurozone retail slipped into contraction with a score of 48.5. The Euro remained in positive territory against the majority of its peers, but slumped verses the charging ‘Aussie’.
The account of the latest European Central Bank (ECB) monetary policy meeting is due out today, which could generate significant Euro movement, especially if ‘Brexit’ fallout is mentioned.
US Dollar
The US Dollar was mixed yesterday, kept soft by comments from Fed Official William Dudley. In assessing the impact of the UK’s ‘Brexit’ vote upon the US economy, Dudley commented that the long-term impacts were currently unclear. Pointing to ‘Brexit’ and low US inflation, he suggested that the Federal Open Market Committee (FOMC) should be patient with regards to hiking US interest rates. Bets of further monetary tightening fell even further, lessening the appeal of the US Dollar, but the ‘Greenback’ began to recover after the headline ISM Non-Manufacturing Composite index for June posted a strong rise from 52.9 to 56.5, much better than the forecast uptick to 53.3.
US labour market data is due for release today, although with forecasts showing little change on the previous month’s figures, the data may not have much of an impact.
Canadian Dollar
The Canadian Dollar was weak overall yesterday, dragged lower by a continued slide in crude oil prices. Trade data released later in the day showed a mixed picture. On the one hand, the international merchandise trade report showed that energy exports rose 7.1% in May, while prices increased 9.7%. Canada’s trade surplus with the United States recovered from April’s low. However, overall the Canadian trade deficit, excluding US trade, widened considerably from CA$4.6 billion to a record high of CA$6 billion.
Canadian Building permits are due for release today. Forecasts are for 2% growth after April’s -0.2% decline.
New Zealand Dollar
The New Zealand Dollar remained weak after Tuesday’s decline in dairy prices. Global risk appetite remained firmly off yesterday, with stocks and commodities posting sharp declines. Positive US data further compressed the ‘Kiwi’, with little domestic data to provide support.
There is no New Zealand data set for publication today.
Data Released
July 7th 09.30 GBP Industrial Production (YoY) (MAY) 0.5%
July 7th 09.30 GBP Manufacturing Production (YoY) (MAY) 0.6%
July 7th 12.30 EUR ECB account of the monetary policy meeting
July 7th 13.30 USD Initial Jobless Claims (JUL 2) 267k
July 7th 13.30 USD Continuing Claims (JUN 25) 2110k