Australian Dollar
Markets were still unhappy about the previous day’s poor US data, boosting the appetite for high-risk currencies. As a result the Australian Dollar strengthened, bolstered by suggestions that the Reserve Bank of Australia (RBA) won’t cut the official cash rate much further.
Although the comments were made by Glenn Stevens, who is retiring as Governor of the RBA next month, markets have still reacted positively to his assessment that negative interest rates are unlikely and lower interest rates would harm Australian banks.
His words could be considered moot, given the fact incoming Governor Philip Lowe may hold a different point of view, but his assessment that further easing may not be beneficial has nonetheless improved the outlook for the Australian Dollar.
The Consumer Inflation Expectation for August is set for release today.
Sterling
The Pound slumped yesterday, allowing AUD/GBP exchange rates to trend bullishly. Tuesday’s news that the Bank of England (BoE) had failed to find enough bonds to fulfil its first consignment of asset purchases was still concerning investors. The Bank released a statement to say that it would simply add the shortfall to the targets for a later round of asset purchasing, but markets were worried that this first failure signalled a flaw in Threadneedle Street’s plans to stimulate the UK economy. The second reverse auction – in which investors offered to sell bonds to the Bank – went down without a hitch, but it was for shorter-term bonds.
The RICS House Price Balance for July is expected to slump from 16% down to 6%. Considering the index has already fallen from above 40 before the Brexit referendum, this could soften the Pound further on continued fears of a hit to the property sector.
Euro
There was no high-impact Eurozone data released yesterday, although markets were cheered by the fact that the EU would not impose fines upon Spain and Portugal. The two nations have significantly breached EU targets for running budget deficits in excess of the 3% target. Markets were worried that the EU would levy fines against the countries, thereby increasing their financial burdens and making matters worse. Spain and Portugal now have longer-term targets to gradually reduce their deficits, lessening the need for unpopular austerity measures that may have fuelled anti-EU sentiment.
There is no particularly impactful data set for release from the Eurozone today.
US Dollar
The US Dollar remained bearish yesterday, with markets and economists still focussed on Tuesday’s disappointing productivity data. The figures took the shine off Friday’s stellar Non-Farm Payrolls result, keeping bets for the first monetary tightening from the Fed since last December firmly in mid-2017 at the earliest. Gold was on the rise as US Dollar weakened and there was little domestic data that could provide support.
US initial jobless claims and continuing claims figures for last week are expected to show a slight improvement on previous figures. If they were to disappoint forecasts, this may further add to the miasma currently hanging over the US economic outlook.
Canadian Dollar
The Canadian Dollar was largely weak yesterday, except against the US Dollar and Pound Sterling, which were both on strong downtrends. A new survey of Canadians revealed that the percentage of the population holding a negative impression of the domestic economy was on the rise, climbing from 39% last year to 48% this year. Oil was uncertain, making strong gains in the afternoon after a morning of losses.
The Canadian New Housing Price Index for June is set for release today.
New Zealand Dollar
Despite being on the eve of an anticipated Reserve Bank of New Zealand (RBNZ) interest rate cut, the New Zealand Dollar strengthened yesterday. Weak appetite for the US Dollar continued to boost the ‘Kiwi’, significantly curbing the losses made as the markets priced in the expected policy easing. Opinion was that the RBNZ would have to be extremely dovish in the statement following the meeting in order to weaken the ‘Kiwi’ further.
The fallout from this morning’s Reserve Bank of New Zealand interest rate decision and accompanying statement will drive New Zealand Dollar movement today.
Data Released
August 11th 07.00 NZD Reserve Bank of New Zealand Rate Decision (AUG 11) 2.00%
August 11th 09.01 GBP RICS House Price Balance (JUL) 6%
August 11th 11.00 AUD Consumer Inflation Expectation (AUG)
August 11th 22.30 USD Initial Jobless Claims (AUG 6) 265k
August 11th 22.30 USD Continuing Claims (JUL 30) 2130k
August 11th 22.30 CAD New Housing Price Index (YoY) (JUN)