Australian Dollar
The Australian Dollar recovered all of its post-‘Brexit’ vote losses yesterday thanks to strong domestic data and firm risk-appetite. While consumer confidence inched lower, the NAB Business Conditions index climbed from 10 to 12, while business confidence increased from 3 to 6. Credit card purchases were also up; a promising sign for inflation.
The Westpac Consumer Confidence index could generate some movement for the Australian Dollar today if it shows a particular strengthening or weakening in consumer sentiment. Chinese trade data could also affect the ‘Aussie’ – if a drop in imports is reported, this suggests weakening demand for overseas goods and services.
Sterling
Expectations that Theresa May would become Prime Minister by the end of the European session on Wednesday kept AUD/GBP in check yesterday. Markets were relieved that one of the many points of uncertainty swirling in post-‘Brexit’ Britain was soon to be resolved. May had already stated that she would lead the UK out of the EU, despite having supported the ‘Remain’ camp in the referendum. Nonetheless, investors were relieved to have a ‘Remainer’ in charge of the exit negotiations, as some believe they would be able to secure a better deal from the EU than a ‘Brexiter’ could.
The only UK development on the economic calendar today is the release of the Bank of England (BoE) Credit Conditions & Bank Liabilities Surveys. Markets are more likely to look ahead to Thursday’s interest rate decision, however, creating downside risks for the Pound.
Euro
Yesterday’s Eurozone data was fairly pedestrian, being largely in line with market forecasts. Finalised German inflation data reaffirmed previous measures, so there was nothing there to particularly move the markets. The Euro slumped, however, thanks to continuing worries over the state of the Italian banking industry. The International Monetary Fund (IMF) warned that Italy faced ‘two lost decades’ of growth. Meanwhile, tensions rose further as the Eurogroup continued to consider the levying of fines against Spain and Portugal for breaching EU budget deficit restrictions.
Eurozone industrial production figures for May are the only ecostats on the Eurozone calendar today. As the result is expected to tick lower from 2% to 1.3%, there are downside risks facing the Euro.
US Dollar
The US Dollar slumped yesterday, with investors in no mood for the safe-haven ‘Greenback’. Risk-appetite was clearly prevalent; the S&P index hit a new historic high, breaking a record held for over a year. The weakness of the ‘Buck’, coupled with low bond yields, has seen investors turning to stocks in order to make a profit. With the Federal Reserve unlikely to be in a position to hike rates for some time to come, the US Dollar could stay weak for the foreseeable future. The day’s economic data was mixed, with labour market conditions remaining worse-than-expected and business optimism rising further-than-forecast.
As well as wholesale inventories and mortgage applications data for the first week in July, the US economic calendar also holds speeches from several Federal Reserve officials today, with Kashkari, Mester and Kaplan all making public appearances throughout the day.
Canadian Dollar
There was no domestic data from Canada yesterday. The Canadian Dollar didn’t benefit from risk-appetite either, except against the safe-haven US Dollar and the Euro. Crude oil remained weak, with Brent Crude only trading around US$47.60 per barrel despite gains of 3.1%. The Canadian Dollar could find support later in the form of the latest forecasts from the Organization of Petroleum Exporting Countries (OPEC), which expects the oil market to tighten next year, pushing prices higher.
There is little Canadian data due out today, but at midnight the Bank of Canada (BOC) will announce its latest interest rate decision. No change is expected, but the accompanying Monetary Policy Report could contain clues to the Bank’s outlook.
New Zealand Dollar
The New Zealand Dollar gained a boost from risk appetite yesterday, although it lost out against the more popular Australian Dollar and the recovering Pound Sterling. No domestic data was released yesterday, but the demand for high yields, which boosted stocks and commodities across the world, kept the ‘Kiwi’ advance strong.
The only data for New Zealand today is the food prices index for June, which will give a mild indication on the state of inflationary pressures within the country. China’s trade data is likely to be a bigger mover of the ‘Kiwi’.
Data Released
July 13th CNY Trade Balance (JUN) $46.00b
July 13th 08.45 NZD Food Prices (MoM) (JUN)
July 13th 10.30 AUD Westpac Consumer Conf Index (JUL)
July 13th 10.30 AUD Westpac Consumer Confidence (JUL)
July 13th 18.30 GBP Bank of England Credit Conditions & Bank Liabilities Surveys
July 13th 19.00 EUR Eurozone Industrial Production w.d.a. (YoY) (MAY) 1.3%
July 13th 21.00 USD MBA Mortgage Applications (JUL 8)