Australian Dollar
Deloitte Access had both positive and negative news for the Australian economy yesterday. On the plus side, the institution believed that the Western Australia region is emerging from the worst of its headwinds after 18 months of falling activity. However, Deloitte also said that the fortunes of South Australia will be made or broken by the awarding of a $50 billion naval submarine contract.
Overall, the Australian Dollar was advancing, although a couple of more buoyant currencies managed to push the ‘Aussie’ into negative territory.
Today’s most important data will be the Reserve Bank of Australia’s (RBA) July meeting minutes.
Sterling
There were plenty of headwinds for the Pound yesterday, but the AUD/GBP exchange rate slumped deep into negative territory. This was largely thanks to the fact that Bank of England (BoE) policymaker Martin Weale made a speech downplaying the odds of an interest rate cut in the upcoming August policy meeting. Investors reacted positively to the news, although a dramatic reduction in UK growth forecasts from EY Item Club weighed on the Pound.
The UK consumer price index figures for June are released later today and are expected to show a mild uptick in inflation. Considering inflation is likely to surge on the back of the significantly weakened Pound, these figures could be considered moot. Yet markets may be interested in them due to the fact that they give a good starting point from which future volatility can be measured in relation to ‘Brexit’ volatility.
Euro
Market confidence that the European Central Bank (ECB) would make no changes to monetary policy during Thursday’s policy meeting helped the Euro trend bullishly yesterday. The Bank of England (BoE) leaving UK interest rates on hold at their most recent meeting has essentially given the ECB a mandate to do so. However, markets are wondering how the ECB will be able to continue with the current rate of asset purchasing under the quantitative easing scheme, given that so many bonds are currently ineligible.
The ZEW economic sentiment surveys for Germany and the Eurozone are due for release today. These are considered to be important indicators of sentiment in the currency bloc, so the Euro could weaken if the results fall on last month’s figures as is predicted.
US Dollar
Expectations of static US interest rates as a result of next week’s Federal Open Market Committee (FOMC) policy meeting were at almost zero yesterday, weakening the US Dollar. Markets currently see just a 1.8% chance that the Fed will hike rates, although the long-term outlook was more positive, with a 44% chance of higher rates having been priced in by the end of the year. The Australian Dollar traded around opening levels against the US Dollar.
Today is quite light on US data – as is the rest of the week – with only housing starts and building permits figures from June due for release.
Canadian Dollar
With no domestic data to provide support, the Canadian Dollar was left at the mercy of developments on the oil markets yesterday. A huge decline in WTI and Brent crude oil dragged the Canadian Dollar deep into negative territory, with both indexes sliding by over -2.1% during the session. At one point WTI fell back below the US$45 per barrel mark.
There is no Canadian data on the calendar for today. The Canadian Dollar could therefore find itself in the grips of oil market volatility.
New Zealand Dollar
Weak data released yesterday kept the New Zealand Dollar firmly in negative territory. The Performance of Services Index for June weakened ever so slightly, although printing at 56.7 kept it firmly in growth territory. Less positive was the fact that the second quarter consumer price index figures both undershot forecasts by ten basis points, leaving both quarter-on-quarter and year-on-year growth at 0.4%.
The latest GlobalDairyTrade auction takes place later today. Prices marginally softened last month; a repeat performance could significantly weaken the New Zealand Dollar, while price growth would boost the ‘Kiwi’.
Data Released
July 19th 11.30 AUD RBA July Meeting Minutes
July 19th 14.00 NZD Dairy Auction Avg. Winning Price MT (JUL 19)
July 19th 18.30 GBP Consumer Price Index (YoY) (JUN) 0.4%
July 19th 19.00 EUR German ZEW Survey (Economic Sentiment) (JUL) 9
July 19th 22.30 USD Housing Starts (MoM) (JUN) 0.1%