Australian Dollar
The Australian Dollar made strong advances yesterday, despite weakening consumer sentiment figures. The latest Westpac Consumer Confidence Index for July dipped into negative territory, with a drop from 102.2 to 99.1 showing that pessimism is now marginally the dominant outlook. The drop of -3% builds upon last month’s -1% decline, although on an annual basis consumer sentiment remains significantly higher. Also providing headwinds for the ‘Aussie’ were comments from the Reserve Bank of Australia’s (RBA) Head of Financial Stability, Dr Luci Ellis, who warned that the Australian bank’s strategy of focussing on low-risk lending was inflating the housing bubble and risking sector collapse. Regardless, the Australian Dollar remained on strong form.
The Australian Dollar is likely to see considerable movement today as a result of June’s jobless data, with the unemployment rate forecast to weaken from 5.7% to 5.8%.
Sterling
AUD/GBP was trending bullishly yesterday, with the Pound’s initially uncertain movements quickly turning into a bilateral slide across the board. Anticipation of Theresa May becoming Prime Minister by the end of European trading was unable to provide enough support to prevent the Australian Dollar from advancing. Expectations of policy easing from the Bank of England (BoE) undermined the Pound, which was pressured lower by new surveys showing the effects of the ‘Brexit’ fallout. Survey’s showed that a large majority of UK firms were intending to at least postpone hiring until the UK’s relationship with the EU after the ‘Brexit’ becomes clear, with nearly a quarter planning to decrease employment over the coming year.
Today’s interest rate decision meeting from the Bank of England is likely to weigh on the Pound.
Euro
The Euro was able to hold opening levels against the Australian Dollar yesterday, despite headwinds from domestic data. Consumer price data for a number of Eurozone countries painted a mixed picture overall, giving investors little clarity on whether inflationary pressures in the currency bloc are building or weakening. Eurozone industrial production figures for May severely disappointed forecasts; on the month production declined -1.2% instead of -0.8%, while annualised production grew just 0.5% instead of 1.3%. The previous month’s figures were revised higher, however. Investors weren’t feeling confident in the Eurozone, however, as evidenced by the fact that Germany was able to auction ten-year bunds with a negative yield for the first time in history.
There is no Eurozone data set for release tomorrow.
US Dollar
No hope of monetary tightening from the Federal Reserve in the short term kept the US Dollar weak yesterday, fuelling risk appetite. Two Fed officials spoke, but their comments contradicted each other. Neel Kashkari’s outlook confirmed the general market consensus when he suggested patience with regards to monetary policy normalisation going forwards. Loretta Mester was more hawkish, however, repeating the line that gradual normalisation should continue. Markets seemed disinclined to listen to her, however. Import price data disappointed, with the index growing just 0.2% in June instead of the 0.5% predicted while annualised prices declined -4.8% instead of -4.6%.
US Initial jobless claims and continuing claims figures are predicted to weaken on previous readings, which would likely soften the US Dollar.
Canadian Dollar
The Canadian Dollar trended bullishly yesterday on the back of market confidence that the Bank of Canada (BOC) would not cut interest rates at the day’s policy meeting. This trend was reversed, however, after the BOC cut their growth forecasts, blaming – amongst other things – the UK’s ‘Brexit’ referendum.
Canadian housing prices could move the ‘Loonie’, although the effects of the Bank of Canada (BOC) policy meeting at midnight could still be the main driver of the Canadian Dollar should anything particularly impactful come from either the meeting or the accompanying policy statement.
New Zealand Dollar
The New Zealand Dollar was weak against the majority of its peers yesterday, with the exception of Pound Sterling and the US Dollar. Concern that the Reserve Bank of New Zealand (RBNZ) is still struggling to understand why inflation remains so low in the country weakened the ‘Kiwi’. A speech from a senior RBNZ official, posted on the Bank’s website, suggested that the RBNZ was planning on an even more intense scrutiny of inflation in the coming months.
The Business NZ Performance of Manufacturing Index and the ANZ Consumer Confidence Index figures for June offer potential for New Zealand Dollar movement.
Data Released
July 14th 08.30 NZD Business NZ Performance of Manufacturing Index (JUN)
July 14th 11.30 AUD Employment Change (JUN) 10.0k
July 14th 11.30 AUD Unemployment Rate (JUN) 5.8%
July 14th 21.00 GBP Bank of England Rate Decision (JUL 14) 0.25%
July 14th 22.30 USD Initial Jobless Claims (JUL 9) 265k
July 14th 22.30 USD Continuing Claims (JUL 2) 2140k
July 14th 22.30 CAD New Housing Price Index 2.2%