Australian Dollar
The Australian Dollar was largely strong yesterday thanks to the outcome of the US Federal Reserve rate decision. Also helping boost the ‘Aussie’ was a prediction from UBS economists that the Australian economy was due to receive a capital expenditure ‘super spike’. This will be caused largely by additional government spending, with the analysts estimating the total amount at around AU$73 billion, a 205% year-on-year increase that represents 4.4% of Australia’s nominal GDP. This will help counterbalance any drag from the spiking housing market, according to the UBS economists. Somewhat weighing on Australian Dollar gains, however, was the second-quarter export and import price indices, which failed to strengthen anywhere near forecast levels.
Only low and medium impact Australian producer price indices and private sector credit figures are due for release today.
Sterling
The latest sign of Brexit fallout to allow the Australian Dollar to extend bullish gains on the Pound came courtesy of Lloyds Banking Group. The group has announced that it will be cutting an additional 3,000 jobs and closing 200 more branches, on top of its current three-year plans to cut costs which were announced towards the end of 2014. The measures have largely been taken to help prepare the bank for an anticipated interest rate cut from the Bank of England (BoE) in the next policy meeting. Lloyds believe that this could reduce its ability to capitalise itself by eating into profits; the latest cost-saving measures are estimated to be saving around £400 million.
The UK GfK consumer confidence index is set for release later today. It is predicted to show a strong decline, but in reality the final reading could be even worse-than-anticipated. Recent post-Brexit data has severely disappointed forecasts, so it is entirely possible that today’s GfK reading will do the same.
Euro
Strong labour market data boosted the Euro yesterday. The number of Germans out of work fell by a larger-than-expected -7,000. While the drop was not enough to lower the unemployment rate, the figures were better than the predicted -4,000 decline in joblessness. Spanish unemployment reached a six-year low, although with 20% of adults still out of work, this figure wasn’t quite as cheering as the German data. Later, preliminary German consumer price index figures for July revealed stronger-than-expected inflation. Monthly price growth accelerated from 0.1% to 0.3%, ten basis points above forecasts, while annualised growth unexpectedly accelerated from 0.3% to 0.4%.
There is plenty of Eurozone data set for release today, with French GDP, German retail sales, the Eurozone unemployment rate/estimated consumer price index and high-impact Eurozone GDP in the data docket. With most of the data forecast to weaken on previous readings, the Euro is facing downside risks today.
US Dollar
Yesterday morning’s policy announcements from the Federal Reserve weakened the US Dollar. Markets were unsurprised that the Federal Open Market Committee (FOMC) left interest rates on hold, but the tone of the accompanying policy statement was less hawkish than markets had hoped for. The Fed did upgrade their outlook for the economy, citing strengths in the labour market, while noting that downside risks had lessened. However, markets had been hoping for a clearer signal that interest rates would be increased in September; the Fed had widely telegraphed its intention to hike rates during the months preceding last December’s monetary tightening. The day’s data also disappointed, with pending home sales barely registering any growth despite strong expectations, the advance goods trade deficit unexpectedly widening and higher-than-expected initial and continuing jobless claims figures.
The US Dollar could find itself recovering from Fed-inspired weakness today with the publication of annualised second-quarter GDP, which is expected to strengthen from 1.1% to 2.6%, and personal consumption figures, forecast to accelerate from 1.5% to 4.3%.
Canadian Dollar
Crude oil continued its seemingly unstoppable descent yesterday, with WTI falling below the US$42 per barrel market to hit a fourteen-week low. Brent Crude edged towards US$43, hitting a nine-and-a-half week low. A few weeks ago, markets were viewing US$55 per barrel as the next target for Brent; now it looks as though US$45 is going to be a point of resistance again, assuming the weakness in the market abates soon. Unsurprisingly, the Canadian Dollar was weak yesterday, although the Pound was so weak the ‘Loonie’ was able to record gains.
While some domestic data will finally arrive to rescue the Canadian Dollar from the weakening oil markets, May’s GDP figures are forecast to soften on the year and fall into contraction on the month.
New Zealand Dollar
With no data to provide support, the New Zealand Dollar was left to be moved by fears of an approaching interest rate cut from the Reserve Bank of New Zealand (RBNZ). As a result, the ‘Kiwi’ weakened, despite what should have been supportive softness from the US Dollar.
Today’s New Zealand data is mostly low-impact, with the calendar holding building permits figures for June, July’s ANZ Activity Outlook and NBNZ Business Confidence and the June M3 Money Supply.
Data Released
July 29th 09.05 GBP GfK Consumer Confidence Survey (JUL) -8
July 29th 11.00 NZD NBNZ Business Confidence (JUL)
July 29th 11.30 AUD Private Sector Credit (YoY) (JUN) 6.5%
July 29th 19.00 EUR Eurozone Gross Domestic Product s.a. (YoY) (2Q A) 1.5%
July 29th 22.30 CAD Gross Domestic Product (YoY) (MAY) 1.3%
July 29th 22.30 USD Gross Domestic Product (Annualized) (2Q A) 4.3%