Australian Dollar
The Australian Dollar stood firm yesterday, with poor US data making up for disappointing Australian reports to keep the ‘Aussie’ on an uptrend. Australian retail sales growth slowed unexpectedly on a seasonally-adjusted basis in June, weakening from 0.2% to 0.1% instead of accelerating to 0.3%. On a quarterly basis, growth of sales excluding inflation slipped to 0.4% instead of holding steady at 0.5% as predicted. AUD remained strong, however.
On a domestic front, the AiG Performance of Construction Index for Australia is set for release today, as is the Reserve Bank of Australia’s (RBA) Statement on Monetary Policy, although with key US data on the calendar, the Australian Dollar could be more likely to react to US developments.
Sterling
The Australian Dollar soared against the Pound yesterday following more drastic-than-expected policy easing from the Bank of England (BoE). As well as cutting interest rates by -0.25% as predicted, the Monetary Policy Committee (MPC) announced £70 billion worth of additional quantitative easing, including £10 billion worth of corporate bond purchases and a £100 billion fund to help banks deal with the profit squeeze caused by low rates as they keep lending to consumers. Because these measures were much more severe than had been forecast, the Pound tumbled across the board, allowing the Australian Dollar to rack up substantial gains.
There’s no impactful UK data due out today. AUD/GBP could weaken, however, because traders yesterday were betting against the Pound, meaning there is the likelihood of a correctional rebound.
Euro
Markets were not impressed by the latest European Central Bank (ECB) Economic Bulletin yesterday. Although it noted that the financial market volatility following the UK referendum seemed to have abated, the bulletin raised concerns about global growth and Eurozone inflation. Investors were particularly perturbed by the suggestion that inflation would remain ‘very low’ over the coming months. As a result, the Euro slumped, making significant losses against the majority of its peers, with the unsurprising exception of bullish gains against the Pound.
German factory orders data may weaken the Euro today as forecasts show an accelerated decline from -0.2% to -1.5%.
US Dollar
The US Dollar was soft yesterday. After the previous few disappointing data releases, investors were almost dreading the approach of today’s Non-Farm Payrolls. Expectations were lowered even further after poor jobless claims figures. Initial jobless claims rose against-forecasts from 266k to 269k, while continuing claims fell from 2144k to 2138k instead of to 2130k as predicted. These suggest that today’s forecast of a small drop in unemployment is likely to be disappointed, weakening the ‘Greenback’.
As well as the unemployment figure, the US Non-Farm Payrolls employment change figure – arguably the most important US release in terms of Fed rate hike expectations – is released today. The NFP is predicted to show a more consistent pace of growth than the previous rebound of 287k seen in June. Forecasts are for job growth of 175k, which is more in line with recent months, although markedly below the long-term average of around 200k.
Canadian Dollar
As is quickly becoming traditional, a lack of domestic data left Canadian Dollar investors looking to the oil markets for direction. They weren’t quite sure what to make of what they found; WTI had recovered up to US$41. While a strong performance compared to the last few days, this still leaves the market considerably weakened compared to a few weeks ago.
After another week of being largely pummelled by crude oil, the Canadian Dollar could find some relief in today’s unemployment figures. The picture looks mixed, however, with the Net Change in Unemployment expected to increase by 10k, yet the unemployment rate is also forecast to rise, climbing from 6.8% to 6.9%.
New Zealand Dollar
With no domestic data on the calendar, the New Zealand Dollar was left to react to strength in the US Dollar. Thanks to the poor US claims reports, the ‘Kiwi’ was able to strengthen.
There is no New Zealand data due out today, although with key US data on the calendar there is sure to be plenty of ‘Kiwi’ movement regardless.
Data Released
August 5th 09.30 AUD AiG Performance of Construction Index (JUL)
August 5th 11.30 AUD AUD RBA Statement on Monetary Policy
August 5th 16.00 EUR German Factory Orders n.s.a. (YoY) (JUN)
August 5th 22.30 USD Unemployment Rate (JUL) 4.8%
August 5th 22.30 USD Change in Non-Farm Payrolls (JUL)
August 5th 22.30 CAD Unemployment Rate (JUL) 6.9%
August 5th 22.30 CAD Net Change in Employment (JUL)