Australian Dollar
Policy meeting minutes from the Reserve Bank of Australia (RBA) caused the Australian Dollar to rack up huge losses yesterday. While the account of the meeting showed that policymakers were not overly concerned by the UK’s Brexit decision, they once again pointed to the overvalued ‘Aussie’ as a source of concern. Comments that the RBA will be able to gain a firmer picture of the Australian economy after it has seen key data released before the August meeting were taken by analysts to mean that July 27th inflation data will be the key to future monetary policy. Expectations of a rate cut in August climbed significantly, with Bloomberg finding just one economist in 25 who did not predict looser monetary policy.
The only data available for Australia today is the Westpac Leading Index and the skilled vacancies figure, both for June. It’s more likely that ‘Aussie’ movement will be a continuation of today’s slump, with the Australian Dollar either moving further into negative territory or experiencing a rebound as investors speculate on the weakened currency.
Sterling
The Australian Dollar’s losses were smallest against the Pound, but only because the UK unit was battling some severe headwinds yesterday. The Pound had fallen ahead of the day’s inflation data anyway, but the result served to weaken Sterling even further. Somewhat counterintuitively, this was because consumer price growth strengthened in June. Under normal circumstances, the Pound would have seen a bullish rise as a result, but because this was the last measure of inflation before the UK’s ‘Brexit’ vote, this performance could complicate things further down the line. The huge drop in the Pound following the ‘Brexit’ is likely to artificially push inflation up above the Bank of England’s (BoE) target. Yesterday’s figures give it a figurative head start to do so, compounding the problem facing the UK’s economy.
Today’s unemployment and wage growth figures could move the Pound. Similar to today’s inflation statistics, their strength or weakness could have a significant effect on how ‘Brexit’ related developments unfold. Wage growth figures are for May, however, so they will not have such a volatile impact.
Euro
The Euro was mixed yesterday, making large gains verses the Australian Dollar, while slumping against the US Dollar. The common currency started the session strong, but the results of the latest ZEW economic surveys gradually eroded Euro strength as the markets came to grips with the severe drop in market sentiment. German economic sentiment in July was expected to fall from 19.2 to 9, but instead crashed to -6.8, while the same index for the Eurozone fell from 20.2 to -14.7. Analysts warned that the markets weren’t pricing-in the true extent of the predicted ‘Brexit’ fallout; a fact that is likely to weigh on the Euro going forwards.
Only low impact Eurozone data is set for release today, so Euro movement is unlikely to be overly driven by developments on the economic calendar.
US Dollar
The International Monetary Fund (IMF) may have trimmed its global economic growth forecasts yesterday, but the US Dollar strengthened across the board. Markets had been expecting a cut – and that ‘Brexit’ would be to blame – yet the Fund only revised its forecasts lower by -0.1%. This was enough to boost the ‘Greenback’ on safe-haven demand, but not enough to raise concerns over the impact of ‘Brexit’ upon US growth. Strong housing start figures also boosted the US Dollar after growing 4.8% instead of recovering from -1.7% to just 0.2%.
Today is a very sparse day for US data, with only the MBA Mortgage Applications figure set for release towards the end of the day.
Canadian Dollar
Slumping oil prices weakened the Canadian Dollar yesterday, but the ‘Loonie’ began to strengthen after the IMF’s latest growth forecasts. The fact that the Fund only downgraded this year’s Canadian growth by ten basis points has helped calm fears over the impact of the Alberta wildfires. The IMF also revised their 2017 predictions for Canada 0.2% higher, helping to lessen the negative impact of the 2016 downgrade.
There is no Canadian data on the economic calendar for today.
New Zealand Dollar
The latest GlobalDairyTrade auction yielded no change in the overall dairy price index on the last event, where prices had fallen -0.4%. While not exactly positive, this was a better result than a large slump, so the New Zealand Dollar was able to keep the gains it had made earlier in the day. The New Zealand Dollar had climbed previously thanks to low appetite for the Australian Dollar leaving the ‘Kiwi’ as the high-yield asset of choice for many investors.
New Zealand is not set to release any domestic data today.
Data Released
July 20th 10.30 AUD Westpac Leading Index (MoM) (JUN)
July 20th 18.00 EUR Eurozone Current Account s.a. (euros) (MAY)
July 20th 18.30 GBP Jobless Claims Change (JUN) 4.0k
July 20th 21.00 USD MBA Mortgage Applications (JUL 15)