Australian Dollar
Markets did not react well to mixed inflation data yesterday, with a strengthening US Dollar compounding the Australian Dollar’s losses. It is widely believed that yesterday’s second-quarter inflation data would be the key in deciding whether or not the Reserve Bank of Australia (RBA) would cut interest rates in an upcoming policy meeting. A strong inflation figure would have staved off those expectations, while a weak one would almost guarantee further policy loosening. Year-on-year consumer price growth slowed from 1.3% to 1% – ten basis points below forecast. However, the RBA trimmed mean version of the CPI held steady at 1.7%, despite a slowdown to 1.5% having been forecast. The results kept the future of monetary policy clouded and so traders pulled away from the uncertainty by selling out of the ‘Aussie’.
Export and import price indexes are the only Australian data due today.
Sterling
Australian Dollar losses against the Pound were barely muted, despite the fact that Sterling had softened in response to the latest GDP figures. While traders would usually welcome stronger-than-forecast economic growth, the final second-quarter figures had markets concerned that the Brexit fallout would derail the UK economy just as it was beginning to strengthen. Many were too busy looking ahead to a likely Q3 slump to be particularly cheered by the Q2 performance. CBI Retailing Report Sales also posted a huge drop into negative territory.
There is no UK data set for release today.
Euro
The latest German consumer confidence survey showed robust consumer sentiment, with the GfK report showing just a -0.1 point weakening. This was below the small drop forecast and showed that consumers in the Eurozone were largely unaffected by the UK’s Brexit decision. When combined with the latest German IFO surveys, released earlier in the week, the data painted a picture of an economy easily weathering the fallout of the UK’s referendum. This helped the Euro strengthen, thanks to calming fears that the Brexit would have a more severe effect on the Eurozone than the UK. Concerns remained over the Italian banks and budget deficits in Spain and Portugal, however.
The Euro is likely to see significant movement today thanks to the release of the German unemployment rate/change figures as well as preliminary German consumer price index figures for July.
US Dollar
The US Dollar advanced yesterday ahead of the Federal Open Market Committee (FOMC) policy decision. Markets were still expecting more hawkish commentary from the Fed following the meeting, even after the latest durable goods orders data printed poorly. Forecasts were for a slowdown in the rate of decline from -2.2% to -1.4%. However, not only was the previous month’s decline retrospectively upgraded to -2.8%, June’s preliminary figure clocked in at a worse-than-expected -4%.
US trade balance and jobless claims figures are due out today, although the markets may still be too busy reacting to this morning’s FOMC developments to respond notably.
Canadian Dollar
Without any domestic data to provide support, the Canadian Dollar remained at the mercy of the oil markets for another day this week. As a result, the ‘Loonie’ weakened initially due to fresh drops in the price of crude oil, with the WTI index falling towards US$42 per barrel. Oil later began to recover and drag the Canadian Dollar higher, helped by weakness in several of the majors.
Once again, there is no Canadian data available today.
New Zealand Dollar
A lack of data left the New Zealand Dollar at the mercy of market sentiment. With the US Dollar strengthening ahead of the FOMC announcement this morning, there was little to provide support for the ‘Kiwi’. As a result, the New Zealand Dollar slumped against a number of its rivals.
The New Zealand data docket is empty today.
Data Released
July 28th 11.30 AUD Export Price Index (QoQ) (2Q) 3.0%
July 28th 11.30 AUD Import Price Index (QoQ) (2Q) 1.5%
July 28th 17.55 EUR German Unemployment Change (JUL)
July 28th 17.55 EUR German Unemployment Rate s.a. (JUL)
July 28th 17.55 EUR German Consumer Price Index (YoY) (JUL P) 0.3%
July 28th 22.30 USD Advance Goods Trade Balance (JUN) -$61.0b
July 28th 22.30 USD Continuing Claims (JUL 16) 2136k