Australian Dollar
Commodity prices slumped yesterday, weakening the Australian Dollar. Domestic data wasn’t supportive, either; the latest Household, Income and Labour Dynamics in Australia (HILDA) Survey showed that economic wellbeing is no longer improving in the country. While rates of poverty and welfare reliance have fallen, household wealth is stagnating, even as property prices climb upwards. Median income has stalled since 2009, while household wealth has shown little change since 2006. This, along with a strengthening US Dollar, served to weaken the Australian Dollar.
The NAB Business Confidence index for the second quarter is the most impactful Australian data due out today.
Sterling
The Australian Dollar slumped against Pound Sterling yesterday after strong UK jobs data and calming words from the Bank of England (BoE). Markets had expected data from May and June to reveal that businesses had become more cautious with their hiring and employee retention in the run up to the ‘Brexit’ vote. However, unemployment unexpectedly dropped thanks to a strong employment change figure for the last three months. Meanwhile, the BoE boosted investor confidence after stating that there were currently no signs of a post-Brexit slowdown.
The final pre-referendum UK government borrowing figures are due out later today. If borrowing was high last month, this will magnify the effects of Chancellor Phillip Hammond’s intended spending increases, while smaller borrowing will help to contain the impact of additional spending on national debt.
Euro
Markets were looking ahead to today’s European Central Bank (ECB) monetary policy meeting yesterday, with dovish expectations keeping the Euro mixed. Australian Dollar weakness allowed the common currency to make bullish gains, however. On the one hand, markets were expecting the ECB to make no changes to monetary policy in response to the UK’s Brexit decision. However, it was also anticipated that President Mario Draghi would deliver dovish comments in the subsequent press conference, setting the scene for further easing.
The latest ECB monetary policy meeting is taking place today. Investors are expecting no changes to stimulus, but the following press conference is expected to be dovish in tone, which would likely weaken the Euro.
US Dollar
Data for the US was sparse yesterday, but safe-haven demand was high. Slumping commodity prices saw investors turning away from risk-assets, allowing the US Dollar to make some advances. Persistent weakness in the ‘Greenback’ continued thanks to the low expectations of action from the Federal Reserve. MBA mortgage applications – the only US data of particular note for US Dollar traders – declined by -1.3%.
US joblessness data today is expected to show an increase in the number of initial jobless claims, but a decline in the number of continuing claims.
Canadian Dollar
With no Canadian data released yesterday, the Canadian Dollar was once again left in the grips of the commodity markets. Unfortunately for the ‘Loonie’, crude oil was undergoing another slide, with Brent falling -1% and WTI dropping -1.5% during the session. WTI slipped below US$44 per barrel.
The Canadian Dollar could receive a boost from today’s Canadian wholesale sales figures for May, which are expected to see growth accelerate from 0.1% in April to 0.3%.
New Zealand Dollar
There was no New Zealand data released yesterday, causing the New Zealand Dollar to slump against several of the majors. The only ‘Kiwi’ gains were made against its commodity peers; the Australian Dollar and Canadian Dollar. Expectations of today’s Reserve Bank of New Zealand (RBNZ) announcement also kept investors cautious.
The RBNZ will be releasing its updated economic assessment today. In all likelihood this will confirm market fears of an interest rate cut during the next policy meeting, severely weakening the New Zealand Dollar.
Data Released
July 21st 07.00 NZD RBNZ Update On Its Economic Assessment
July 21st 11.30 AUD NAB Business Confidence (2Q)
July 21st 18.30 GBP Public Sector Net Borrowing (Pounds) (JUN) 9.3b
July 21st 21.45 EUR European Central Bank Rate Decision (JUL 21) 0.00%
July 21st 22.30 CAD Wholesale Sales (MoM) (MAY) 0.3%
July 21st 22.30 USD Continuing Claims (JUL 9) 2140k