Australian Dollar
May’s NAB business confidence index plunged from 13 to 7, suggesting that optimism within the domestic economy has weakened significantly. This weighed heavily on the Australian Dollar, particularly as the latest credit card purchase figures proved similarly disappointing. Weaker levels of consumer spending do not bode well for the health of the wider economy, potentially giving the Reserve Bank of Australia (RBA) further encouragement to return to a more dovish outlook on monetary policy.
If the Westpac consumer confidence index also softens this morning the Australian Dollar is likely to remain on a bearish footing against its rivals.
Sterling
As the Conservatives looked to finalise a confidence and supply arrangement with the Democratic Unionist Party (DUP) the mood towards the Pound improved somewhat. With Theresa May looking set to hold onto her position as Prime Minister, for a little longer at least, the sense of political uncertainty weighing on GBP exchange rates eased. Even so, as the latest UK consumer price index showed an unexpected uptick from 2.7% to 2.9% on the year rising inflation looks set to erode consumer spending further in the coming months.
As long as average weekly earnings continue to rise at a slower pace that inflationary pressure, though, Sterling will struggle to hold onto its recent gains.
Euro
Both the latest German wholesale price index and ZEW economic sentiment survey proved disappointing, diminishing the appeal of the single currency. Signs that the Eurozone’s powerhouse economy is not in such a robust state of health gave investors little cause for confidence. As inflation across the currency union struggles to pick up significantly the European Central Bank (ECB) is likely to remain on hold for the foreseeable future. Worries over Greece have also dented the Euro, with tensions rising ahead of this week’s crunch Eurogroup meeting.
Any weakening in April’s Eurozone industrial production data could put further downside pressure on the single currency, with any slowing in output likely to deter investors.
US Dollar
The recent run of soft US data continued overnight as the NFIB small business optimism index failed to pick up as forecast. Nevertheless, markets remain confident that the Federal Reserve will raise interest rates at its June policy meeting. With an imminent rate hike already largely priced into the US Dollar, though, investors saw little reason to favour the safe-haven currency. If policymakers ultimately deliver a dovish hike USD exchange rates could experience a further slump.
A slowdown in advance retail sales may also add to the bearish outlook of the ‘Greenback’, indicating that the world’s largest economy is in less robust health than hoped.
Canadian Dollar
Following unexpectedly hawkish comments from Bank of Canada (BOC) Senior Deputy Governor Carolyn Wilkins the Canadian Dollar has strengthened across the board. With markets speculating that the central bank could raise interest rates in the near future the appeal of the ‘Loonie’ improved. Even though Brent crude remained trapped below the US$50 per barrel mark this was not enough to hamper CAD exchange rates, particularly as Saudi Arabia pledged to cut its real supply of oil further in July.
However, if US stockpiles are found to have increased on the week a resurgence in global oversupply concerns is likely to dent the Canadian Dollar.
New Zealand Dollar
Even in the absence of fresh domestic data demand of the ‘Kiwi’ remained solid, in part thanks to the relative weakness of its antipodean cousin. As markets were in a generally risk positive mood the commodity-correlated New Zealand Dollar benefitted, particularly as expectations point towards a dovish hike from the Fed.
With the first quarter New Zealand current account expected to return to a state of surplus the ‘Kiwi’ could extend its gains further today.
Data Released
June 14th 08:45 NZD Current Account Balance (1Q) 1 billion
June 14th 10:30 AUD Westpac Consumer Confidence (JUN)
June 14th 18:30 GBP Average Weekly Earnings (3M/YoY) (APR) 2.4%
June 14th 19:00 EUR Eurozone Industrial Production (YoY) (APR) 1.4%
June 15th 04:00 USD Federal Open Market Committee Rate Decision 1.25%