Australian Dollar
The Australian Dollar advanced yesterday, although considering the significant weakness of safe-haven assets like the Japanese Yen, the ‘Aussie’s strength seemed relatively muted. Gains were somewhat restrained by a warning from credit rating agency Moody’s, which said that the slim win for the Coalition was credit negative for Australia’s government. Additionally, unemployment figures disappointed. Unemployed rose as expected, but an unexpected increase in the participation rate meant that the joblessness figure was even worse on a relative basis.
Today promises to be an interesting one with regards to global trading. Chinese growth figures could worry the markets and US data has the potential to markedly strengthen or weaken the ‘Kiwi’. The combination of these two sets of releases could be particularly turbulent. Poor Chinese data would weaken the US Dollar on lower rate hike bets, which should strengthen the Australian Dollar. Yet weak Chinese data will also soften the ‘Aussie’ due to trade implications. As a result, the Australian Dollar could find itself trapped between equally strong headwinds and tailwinds.
Sterling
A surprise outcome from the Bank of England (BoE) caused the Australian Dollar to slump yesterday. Markets had widely been expecting the Monetary Policy Committee (MPC) to cut interest rates, even predicting a cut right down to 0.0% and a resumption of quantitative easing. However, the MPC instead decided to hold back and assess the fallout of the ‘Brexit’ vote before acting, with only noted dove Gertjan Vlieghe voting in favour of a cut. The news sent the ‘Aussie’ tumbling as Pound Sterling charged ahead, with profit-taking later clipping some of those gains. The accompanying Monetary Policy Statement firmly suggested further easing would take place at the August meeting, which is only three weeks away.
The UK’s only data today is the construction output figures for May, however, as the PMI for June has already been released and showed a huge unexpected contraction in the sector, the figures for May are unlikely to generate any particular turbulence for the Pound.
Euro
The Euro was mixed yesterday, making minor losses against the Australian Dollar and experiencing a significant decline against the Pound. On the flipside, the common currency saw huge gains against the New Zealand Dollar and the Japanese Yen. The single unit was kept in limbo thanks to speculation over the Bank of England’s upcoming interest rate decision. With no domestic data of note for the Eurozone, there was little to support a Euro rise.
Releases today will include the European Central Bank (ECB) Survey of Professional Forecasters and the finalised Eurozone Consumer Price Index figures for June. No revisions to the previous readings are expected.
US Dollar
Safe-haven demand remained cold yesterday, with the US Dollar weakening in response. Unemployment claims data printed roughly in line with forecasts, while the Monthly Budget Statement showed a significantly weaker surplus than was predicted; US$6 billion rather than US$24 billion. Even comments from the Fed’s Harker that the Federal Open Market Committee (FOMC) should raise interest rates twice during the remainder of the year failed to boost the ‘Greenback’.
Plenty of US Dollar movement can be expected today with the release of several teir-1 publications. Advance retail sales will be followed by consumer price index data, with the University of Michigan Consumer Confidence survey results following at midnight.
Canadian Dollar
Canadian house prices saw a strong rise in May of 0.7% on the month and 2.7% on the year – with forecasters expecting a further rise on the back of the UK’s ‘Brexit’ vote. This could prove problematic going forward, as certain areas of the country already have largely inflated property prices. This kept the Canadian Dollar mixed yesterday, with losses against the Australian Dollar and the Pound countered by advances against the Euro and US Dollar and bullish gains against the New Zealand Dollar. Oil was also posting a strong rise, but given how often and dramatically crude has being moving recently, investors might be starting to take these developments with a pinch of salt until a clear direction becomes apparent in prices.
The existing home sales figure will be the most impactful data due from Canada today.
New Zealand Dollar
Domestic data from New Zealand yesterday was largely supportive, with the Business NZ Performance of Manufacturing Index firming even further to a strong reading of 57.7. Consumer confidence dipped marginally, but the -0.6% drop was nothing overly concerning. This wasn’t enough to support the New Zealand Dollar after the announcement of an unexpected economic update from the Reserve Bank of New Zealand (RBNZ). The unscheduled development has the markets expecting the RBNZ is preparing to cut interest rates at the next policy meeting.
There is no data from New Zealand due for release today, but that doesn’t mean the ‘Kiwi’ is in for a quiet ride. Chinese GDP figures for the second quarter hold the potential to generate significant market volatility, with the health of the Chinese economy still topping the list of fears for many governments, businesses and investors. Later, the high-profile US data could further complicate market movements; strong data will weaken the ‘Kiwi’, while poor data would boost the New Zealand Dollar.
Data Released
July 15th 12.00 CNY GDP SA (QoQ) (2Q) 1.5%
July 15th 12.00 CNY GDP (YoY) (2Q) 6.6%
July 15th 18.30 GBP Construction Output SA (YoY) (MAY) -3.6%
July 15th 19.00 EUR Eurozone Consumer Price Index (YoY) (JUN F) 0.1%
July 15th 22.30 USD Advance Retail Sales (JUN) 0.1%
July 15th 22.30 USD Consumer Price Index (YoY) (JUN) 1.1%
July 15th 23.00 CAD Existing Home Sales (MoM) (JUN)
July 16th 00.00 USD University of Michigan Confidence (JUL P)